Finance Act 2021

Employment income

21 Workers’ services provided through intermediaries

(1) Chapter 10 of Part 2 of ITEPA 2003 (workers’ services provided through intermediaries to public authorities or medium or large clients) is amended as follows.

(2) In section 61N (worker treated as receiving earnings from employment)—

(a) in subsection (3), for “and 61V” substitute “, 61V and 61WA”;

(b) in subsection (5), for “section 61V” substitute “sections 61V and 61WA”;

(c) in subsection (5A), in the words before paragraph (a), for “and 61V” substitute “, 61V and 61WA”.

(3) In section 61O (conditions where intermediary is a company)—

(a) in subsection (1), for paragraph (b) substitute—

“(b) subsection (1A) or (1B) is satisfied.”;

(b) after subsection (1) insert—

“(1A) This subsection is satisfied where the worker has a material interest in the intermediary.

(1B) This subsection is satisfied where—

(a) the worker has a non-material interest in the intermediary,

(b) the worker—

(i) has received,

(ii) has rights which entitle, or which in any circumstances would entitle, the worker to receive, or

(iii) expects to receive,

a chain payment from the intermediary, and

(c) the chain payment does not, or will not, wholly constitute employment income of the worker (apart from as a result of this Chapter).”;

(c) after subsection (4) insert—

“(4A) The worker is treated as having a non-material interest in the intermediary if—

(a) the worker, alone or with one or more associates of the worker, or

(b) an associate of the worker, with or without other associates of the worker,

has a non-material interest in the intermediary.

(4B) For this purpose a non-material interest means—

(a) beneficial ownership of, or the ability to control, directly or through the medium of other companies or by any other indirect means, 5% or less of the ordinary share capital of the company,

(b) possession of, or entitlement to acquire, rights entitling the holder to receive 5% or less of any distributions that may be made by the company, or

(c) where the company is a close company, possession of, or entitlement to acquire, rights that would in the event of the winding up of the company, or in any other circumstances, entitle the holder to receive 5% or less of the assets that would then be available for distribution among the participators.

(4C) In subsection (4B)(c) “participator” has the meaning given by section 454 of CTA 2010.”

(4) In section 61S(4) (deductions from chain payments), for “services-provider” substitute “relevant person”.

(5) In section 61T(3) (client-led status disagreement process), for “section 61V” substitute “sections 61V and 61WA”.

(6) In section 61U (information to be provided by worker and consequences of failure)—

(a) in the heading, after “worker” insert “or intermediary”;

(b) in subsection (1), for “the worker” substitute “the relevant person”;

(c) in subsection (2), for “the worker” substitute “the relevant person”;

(d) in subsection (3), after “In this section” insert “—

• “relevant person” means the worker or, in a case where the worker has not complied with subsection (1), the intermediary;”.

(7) In section 61V (consequences of providing fraudulent information)—

(a) in subsection (2), in the words before paragraph (a), for “services-provider” substitute “relevant person (or if more than one, the first relevant person) in relation to whom the fraudulent documentation condition is met”;

(b) in subsection (3), for “involves the services-provider” substitute “may involve a services-provider”;

(c) in subsection (5), after paragraph (c) insert—

“(d) a person in the chain who is resident in the United Kingdom or has a place of business in the United Kingdom.”

(8) After section 61W insert—

“61WA Anti-avoidance

(1) This section applies if in any case at least one relevant person in a chain participates in a relevant avoidance arrangement.

(2) An arrangement is a “relevant avoidance arrangement” if its main purpose, or one of its main purposes, is to secure a tax advantage by securing that at least one of the conditions mentioned in section 61O or 61P is not met in relation to an intermediary.

(3) Section 61N(3) has effect as if the reference to the fee-payer were a reference to the participating person, but—

(a) section 61N(4) continues to have effect as if the reference to the fee-payer were a reference to the deemed employer, and

(b) Step 1 of section 61Q(1) continues to have effect as referring to the chain payment made by the deemed employer.

(4) The participating person is—

(a) in a case where only one relevant person participates in the arrangement, that person;

(b) in any other case the highest relevant person in the chain who participated in the arrangement and from whom HMRC considers there is a realistic prospect of recovering, within a reasonable period, the amount of tax that would have been paid (or not repaid) in the absence of the arrangement.

(5) Subsection (3) has effect even though that may involve a participating person being treated as both employer and employee in relation to the deemed employment under section 61N(3).

(6) In this section—

• “arrangement” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable);

• “deemed employer” means a person who would, but for this section, be treated by section 61N(3) as making a payment to the worker;

• “relevant person” means—

  (a)

  the worker;

  (b)

  a person who is resident in the United Kingdom or who has a place of business in the United Kingdom;

• “tax” means income tax (and “tax advantage” is to be construed accordingly”);

• “tax advantage” includes—

  (a)

  avoidance or reduction of a charge to tax or an assessment to tax,

  (b)

  repayment or increased repayment of tax,

  (c)

  avoidance of a possible assessment to tax, and

  (d)

  deferral of a payment of tax or advancement of a repayment of tax.”

(9) In section 688AA(2)(a) (workers’ services provided through intermediaries: recovery of PAYE), after “to a worker” insert “(other than by virtue of section 61WA)”.

(10) The amendments made by this section have effect in relation to deemed direct payments treated as made on or after 6 April 2021.

22 Payments on termination of employment

(1) Section 27 of ITEPA 2003 (UK-based earnings for year when employee not resident in UK) is amended in accordance with subsections (2) to (5).

(2) In subsection (1)—

(a) omit the “or” at the end of paragraph (a), and

(b) at the end of paragraph (b) insert “, or

(c) general earnings to which section 402B (termination payments, and other benefits, that cannot benefit from the section 403 threshold, to be treated as earnings) applies.”

(3) In subsection (2), for “(1)” substitute “(1)(a) or (b)”.

(4) After subsection (2) insert—

“(2A) The percentage of the general earnings within subsection (1)(c) that are an amount of “taxable earnings” from the employment in the tax year in which they are received is given by—

where—

• B is the total amount of general earnings from the employment that it is reasonable to assume the employee would have received in respect of the post-employment notice period (within the meaning given by section 402E(5)) if the employee’s employment had not been terminated until the end of that period, and

• A is the total amount of those general earnings that it is reasonable to assume would have been taxable earnings by virtue of subsection (1)(a) or (b).”

(5) In subsection (3), for “Subsection (2) applies” substitute “Subsections (2) and (2A) apply”.

(6) In section 402B of ITEPA 2003 (termination payments, and other benefits, that cannot benefit from the section 403 threshold, to be treated as earnings), in subsection (1)—

(a) the words from “is treated” to the end become paragraph (a), and

(b) after that paragraph insert “, but

(b) is not capable of being an amount to which section 27 applies by virtue of subsection 1(a) or (b) of that section (UK-based taxable earnings for year when employee not resident in UK).”

(7) In section 402D of ITEPA 2003 (post-employment notice pay)—

(a) in subsection (3), for “and (6)” substitute “, (6) and (6A)”;

(b) in subsection (6), after “month, ” insert “the employee’s basic pay is paid in equal monthly instalments,”;

(c) after subsection (6) insert—

“(6A) In any other case where the last pay period of the employee to end before the trigger date is a month and the employee’s basic pay is paid in equal monthly instalments, then—

• BP is the employee’s basic pay from the employment in respect of the last pay period of the employee to end before the trigger date,

• P is 30.42, and

• D is the number of days in the post-employment notice period.”

(8) The amendments made by this section have effect in relation to general earnings to which section 402B of ITEPA 2003 applies that are paid—

(a) on or after 6 April 2021, and

(b) in connection with a termination of employment that takes place on or after that date.

23 Cash equivalent benefit of a zero-emissions van

(1) Section 155 of ITEPA 2003 (cash equivalent of the benefit of a van) is amended in accordance with subsections (2) and (3).

(2) In subsection (1B)—

(a) in paragraph (a), for “2021-22” substitute “2020-21”;

(b) omit the “and” at the end of that paragraph;

(c) after that paragraph insert—

“(aa) if the van cannot in any circumstances emit CO₂ by being driven and the tax year is 2021-22 or a subsequent tax year, the cash equivalent is nil, and”.

(3) In subsection (1C) omit paragraph (g).

(4) In section 170 of ITEPA 2003 (orders etc relating to Chapter 6 of Part 3 of ITEPA 2003), in subsection (1A)—

(a) in paragraph (b), after “zero-emission van” insert “in tax years 2015-16 to 2020-21”;

(b) omit the “and” at the end of that paragraph;

(c) after that paragraph insert—

“(ba) section 155(1B)(aa) (cash equivalent for zero-emissions vans in tax year 2021-22 and subsequent tax years), and”.

24 Enterprise management incentives

In FA 2020, for section 107 substitute—

“107 Enterprise management incentives

(1) Schedule 5 to ITEPA 2003 (enterprise management incentives) is modified in accordance with subsections (2) and (3).

(2) Paragraph 26 (requirement as to commitment of working time) has effect as if, in sub-paragraph (3)—

(a) the “or” at the end of paragraph (c) were omitted, and

(b) at the end of paragraph (d), there were inserted “, or

(e) not being required to work for reasons connected with coronavirus disease (within the meaning given by section 1(1) of the Coronavirus Act 2020).”

(3) Paragraph 27 (meaning of “working time”) has effect as if, in sub-paragraph (1)(b), for “(d)” there were substituted “(e)”.

(4) Section 535 of ITEPA 2003 (disqualifying events relating to employee in relation to enterprise management incentives) has effect as if, in the closing words of subsection (3), for “(d)” there were substituted “(e)”.

(5) The modifications made by this section have effect in relation to the period—

(a) beginning with 19 March 2020, and

(b) ending with 5 April 2022.”

25 Cycles and cyclist’s safety equipment

(1) If a cycle, or cyclist’s safety equipment, was first provided for an employee before 21 December 2020, Condition B in section 244(3) of ITEPA 2003 (requirement that cycle or cyclist’s safety equipment is used mainly for commuting etc) is treated as met in relation to the provision for that employee of that cycle or equipment for the period commencing with 16 March 2020 and ending with 5 April 2022.

(2) In this section “cycle” and “cyclist” have the meanings they have in section 244 of ITEPA 2003 (see subsection (5) of that section).

26 Exemption for coronavirus tests

(1) No liability to income tax arises in respect of—

(a) the provision to an employee of a coronavirus test, or

(b) the payment or reimbursement, to or in respect of an employee, of the cost of such a test.

(2) In this section “coronavirus test” means a test which detects the presence of a viral antigen or viral ribonucleic acid (RNA) specific to severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2).

(3) This section has effect as if it were contained in Part 4 of ITEPA 2003 (employment income: exceptions).

(4) This section has effect in relation to the tax years 2020-21 and 2021-22 (and to the extent the relief provided for by the Income Tax (Exemption of Minor Benefits) (Coronavirus) Regulations 2020 (S.I. 2020/1293) is provided for by this section, it supersedes those regulations).

(5) The Treasury may by regulations provide that this section is also to have effect in relation to such subsequent tax years as may be specified in the regulations.

27 Optional remuneration arrangements: statutory parental bereavement pay

(1) In Schedule 2 to FA 2017 (optional remuneration arrangements), in paragraph 62(9), for “or statutory shared parental pay” substitute “, statutory shared parental pay or statutory parental bereavement pay”.

(2) That Schedule has effect, and is to be deemed always to have had effect, with the amendment made by subsection (1).