UPDATE (18 October 2022): As well as the reduction to the basic and additional rates of income tax, the Government’s plans to make changes to the current IR35 regime have now been scrapped.
The government has proposed to make a number of changes relevant to the employment landscape. Aleksandra Traczyk discusses the recent developments.
On 23 September 2022, the new Chancellor of the Exchequer, Kwasi Kwarteng, made a number of key employment-related announcements as part of his much debated “mini-budget”. The day before, on 22 September 2022, a bill was published that is set to repeal all retained EU law (unless specifically restated). Additionally, on 7 September 2022, it was announced that the government has decided to drop the Bill of Rights Bill before its second reading. Finally, the government has also delayed the second reading of the Data Protection and Digital Information Bill. There have also been some policy announcements made at the Conservative Party Conference.
The mini-budget announcements
In addition to announcing a reversal of the recent increase to the National Insurance contributions, a reduction to the basic and additional rates of income tax (albeit the proposal to reduce the additional rate of income tax has since been scrapped) and the removal of the cap on bankers’ bonuses, the Chancellor has announced a number of other key employment-related changes.
Industrial Action
In response to the recent rise in industrial action, the Chancellor has announced that the government intends to legislate to ensure that unions must put “meaningful” pay offers to a member vote before any strike action is undertaken. The government has also said that it would legislate to ensure that minimum service levels are put in place for transport services to alleviate the impact on travel during any industrial action. The precise form of the legislation is yet to be determined.
IR35 changes
Reforms in 2017 and 2021 to the IR35 regime, which in the context of the engagement of individual contractors via intermediaries saw the end user become responsible for analysing and assessing whether the engagement falls within the IR35 regime, carrying out and disseminating status determination statements and operating PAYE (and account for employers’ NICs) on workers that are deemed to be employees, are to be rolled back. This will mean that the responsibility/risk will now be shifted back to the individual workers (or their PSCs). These changes will take effect from 6 April 2023.
Company Share Option Plans
Under a CSOP, or a company share option plan, a company can offer employees and directors tax-advantaged share options. Under a CSOP, employees are usually exempt from the usual charge to income tax and NICs on the gain made on exercise. CSOPs are often used where a company does not meet the criteria to be able to grant EMI options.
The government announced changes to the CSOP regime intended to expand the scope and availability of the regime – qualifying companies will be able to grant CSOP options to employees over shares with a value of up to £60,000, which is double the current limit. The government also proposes that the CSOP legislation will be amended to widen the types of eligible shares.
The Retained EU Law (Revocation and Reform) Bill
On 22 September 2022, the Retained EU Law (Revocation and Reform) Bill was published.
It will automatically repeal certain EU law retained following Brexit (some 2,400 pieces of legislation) so that it expires on 31 December 2023, unless specific legislation is introduced to amend or restate it. The Bill provides for an extension to the wholesale revocation of laws that have not been amended or restated until 31 December 2026.
These powers do not apply to all EU retained law. They do not apply to laws which are contained in an Act of Parliament. However, they do apply to secondary legislation (i.e. regulations) implementing EU law (such as Working Time Regulations) plus EU-derived employment laws which are contained in Acts but put there by regulations.
The Bill means that, depending on what legislation the government proposes to introduce, the following may be affected:
- TUPE (but only insofar as it implements EU law)
- Part-time and Fixed-term Worker Regulations
- Agency Worker Regulations
- Working Time Regulations
- Various Health and Safety Regulations
It remains to be seen how radical the shake up will be.
The Bill of Rights Bill
On 7 September 2022, it was reported that the Bill of Rights Bill had been dropped by the government and it would not progress to the second reading.
The Bill would have repealed the Human Rights Act 1998 and reframed the UK’s legal relationship with the European Convention on Human Rights, to which the UK would have remained a signatory.
The Data Protection and Digital Information Bill
The Government has postponed the second reading of the Data Protection and Digital Information Bill. We do not yet know if it will be revised, or when it will be debated.
As well as prompting data-driven innovation, the Bill was intended to reduce some of the burdens organisations have come to associate with GDPR. Of particular interest to HR professionals, the Bill contained wider grounds on which organisations would be able to refuse to respond to subject access requests, or charge a fee, where they have determined the request is “vexatious or excessive”. Whether government intends to pursue these changes, or perhaps introduce more radical ones, will hopefully become clear soon.
Most recent developments
Prime Minister Liz Truss announced at the Conservative Party Conference on 2 October 2022 that “thousands of the UK’s fastest-growing businesses would be released from reporting requirements and other regulations in the future”. It is not clear what this will involve but it is likely to be limited to reporting requirements such as gender pay gap reporting and executive pay ratios.