In this report we cover some tax measures affecting global mobility, as well as individual taxpayers and their employers, that were either previously announced or are part of this year’s U.K. Autumn Budget
The Autumn Budget, delivered by the U.K. Chancellor of the Exchequer on 29 October 2018, was badged as the “end of austerity,” as the Chancellor promised a brighter future for British taxpayers.1 There were plenty of announcements that appeared to indicate just that – an end to austerity – although the Budget was fairly light in terms of content affecting global mobility.2
For employers of globally mobile employees there is always a great deal of interest in Budget measures as they can have a direct impact on the cost of assignments.
Over recent years there have been significant changes introduced relating to the taxation of non-domiciled individuals and the treatment of termination payments, however no major changes were announced this Budget.
For tax compliance and cost projection purposes, taxpayers and their tax service providers should be aware that the 2019/2020 rate bands for personal income tax have been adjusted upwards resulting in a potential reduction of tax of up to £860 per year.
As originally announced in the 2018 Spring Statement, the government launched a consultation on the tax and payroll treatment of Short Term Business Visitors from overseas branches of U.K. companies and related issues, with the aim of reducing the compliance burden for employers. The government asked for opinions on two potential policy options:
For details of the Spring Budget announcement and KPMG’s response to the original consultation, see GMS Flash Alert 2018-075 (18 May 2018).
Following a review of the responses, the government announced that the following two changes will be made to the Special Annual PAYE Scheme with effect from 6 April 2020:
The government has decided not to introduce a new tax exemption for STBVs from overseas branches of U.K. companies.
HM Revenue and Customs’ full response to the consultation can be found in the following document (PDF 190 KB).
The extension of the 30 U.K. work-day limit to 60 days will be welcomed by employers, as it will help ensure that more of their STBVs can be included within the Special Annual PAYE Scheme, avoiding the need to undertake strict payroll reporting and tax withholding every month.
The extended reporting deadline for the Special Annual PAYE Scheme will also be helpful, as this will provide employers with an extra month to analyse data, and it also aligns the Special Annual Payroll Scheme reporting with that for the Appendix 4 Short Term Business Visitors Report (which applies to treaty cases where the employer is relieved of applying PAYE).
However, the changes will not alter the scope of the underlying analysis required in respect of a company’s STBV population, which can be complex, involving many stakeholders.
Under current U.K. Capital Gains Tax legislation, an individual can claim relief for any period where the relevant property is the individual’s “Principal Private Residence” (PPR), i.e., his/her main home.
In addition, the individual can claim relief for the final 18 months of ownership, where the property had been the individual’s PPR at any point during his/her ownership.
The individual can also claim letting relief for any periods where the property is let out. In this case, the relief is limited to the lesser of:
The government proposes to make the following two changes with effect from April 2020:
The government will consult on the proposed changes before legislating. It is not yet known from when these changes will apply and we expect further details in the consultation.
These changes may affect outbound assignees from the U.K. who own U.K. property, as it is common for assignees to rent out their U.K. property when on assignment overseas. Such individuals currently may be able to claim relief for the period when their property is rented out, but the proposed changes will limit this. The reduction to the final period of exemption is likely to impact individuals affected by delays to selling their home. This measure will therefore increase any U.K. Capital Gains Tax due on the sale of the property.
The lead option in the government’s recent consultation on improving “IR35” compliance – extending the 2017 public sector reforms to the private sector – will come into effect from April 2020.
This change will see responsibility for determining whether an engagement falls within the IR35 regime, moving from the worker’s Personal Service Company (PSC) to the end user. Where an employment relationship is deemed to exist, the end user of the services would be responsible for operating PAYE/NIC on payments made to those PSCs if it pays them directly. Otherwise, if the end user has contracted with an agency and the agency is paying the PSC for the services rendered, then the agency will be responsible for applying PAYE/NIC to those payments based on the end user’s IR35 determination.
Our discussions with stakeholders during the recent consultation on IR35 in the private sector indicated that 18 months was the minimum realistic lead-in time for larger businesses to accommodate this change. This said, businesses will still need to move quickly to understand the requirements of the new regime, assess their current systems, and implement new procedures and processes so that they can comply with the new rules in time for April 2020.
Whilst this is not a specific mobility issue, global mobility professionals will nevertheless want to be aware of the rules and how they impact the labour supply chain.
Non-contractual, ex-gratia termination payments are currently exempt from National Insurance. As originally mentioned in the Autumn 2017 Budget, these payments were due to become subject to Employer’s National Insurance from April 2019. However, the government has confirmed that this change has been deferred until April 2020.
As previously covered in GMS Flash Alert 2018-122 (18 September 2018), the government had already announced it removed its plans to abolish Class 2 National Insurance.
It is expected this deferral will be welcomed by employers, as it will save them the cost of National Insurance contributions on termination payments for a further year.
Income tax rates and thresholds for 2019/2020 are as shown in the table below. The prospective increase in the personal allowance and rate bands will be welcomed by taxpayers and employers.
|Basic rate||20%||£0 - £34,500||£0 - £37,500|
|Higher rate||40%||£34,501 - £150,000||£37,500 - £150,000|
|Additional rate||45%||Over £150,000||Over £150,000|
Source: KPMG LLP (U.K.)
The tax rates for Scottish taxpayers will be set by the Scottish Parliament early next year.
Additionally, the National Assembly for Wales will set income tax rates for Welsh taxpayers from April 2019. The rates for the 2019/20 tax year are expected to be in line with the England and Northern Ireland rates.
We are expecting a number of more detailed documents and consultation papers to be released over the coming weeks.
KPMG LLP (U.K.) will endeavour to keep readers informed of any further developments that concern individuals, including those on international assignment, and their multinational employers.
The information contained in this newsletter was submitted by the KPMG International member firm in the United Kingdom.
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