Mike Lavan, tax director at KPMG, comments on the changes to Employer’s National Insurance Contributions (NIC) on termination payments
Commenting on the changes to Employer’s National Insurance Contributions (NIC) on termination payments, announced in today’s Budget, Mike Lavan, tax director at KPMG in the UK, said:
“This afternoon the Chancellor confirmed that Employer’s National Insurance Contributions (NIC) will be charged on termination payments in excess of £30,000, taking effect from April 2018. The introduction of this charge comes as little surprise in light of HMRC’s need to raise revenues and the proposals outlined in their termination payment consultation paper last year.
“Aligning the tax and NIC treatment of these payments is understandable, when viewed through the prism of recent recommendations by the Office of Tax Simplification and represents low-hanging fruit for the Chancellor. However, there is a sweetener for employees who will continue to benefit from a Class 1 Primary NIC exemption on the full amount of any termination payment that they receive.
“Nevertheless, this move will be regarded by many employers as another employment-related cost, continuing the trend set by measures in recent years such as the Apprenticeship Levy, Auto-Enrolment and the National Living Wage, which risks making it harder for businesses to deliver on the Government’s objectives to boost jobs, investment and growth.
“Further details will be outlined in the forthcoming technical consultation later this year, but the Government expects to raise revenues totalling £1.42 billion over the coming five years as a result of this and associated measures.”
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