Our experts give their predictions for what the Chancellor might do and suggestions for what he should and shouldn’t do during the Budget announcement on 11 March.
For more information about our coverage on the day and the publications we produce, visit our Budget 2020 topic page.
Open for business
The UK has been through what feels like an interminable period of naval gazing. Now that the Brexit decision is settled, we need the world to know that we are still open for business.
Whilst fulfilling domestic tax and spending pledges is of course important, Budget 2020 should also speak directly and boldly to decision makers internationally.
In particular, given the many mixed and confusing messages on immigration, the new Chancellor should use his maiden budget to help convince overseas employers to send their talented employees to the UK.
In this regard, and beyond the proposed immigration measures, there are a range of reforms that the Chancellor could introduce that would cost relatively little as compared with the positive signal that they send to employers and their would be secondees everywhere.
What should the Chancellor do?
In summary, there should be a package of reforms specifically designed to attract talent to the UK. We should be making it as easy and cost effective as possible for overseas employers to second their employees to the UK and for sought after employees to relocate to take up employment in the UK. Below are some examples of what these reforms could include.
Increase tax relief for relocation expenses
Relocating employees to the UK is costly. This is partly alleviated by the current rules on tax free relocation whereby employers can provide tax free relocation support to employees and their families on “qualifying relocation expenses”, including the tax free shipment of household goods, airfares and temporary accommodation.
However, the level of the relief is restricted to £8,000. This was set almost three decades ago and urgently needs updating as, nowadays, it would barely cover the cost of transporting household goods across the worlds in many cases, let alone any other relocation expenses.
To reflect today’s prices, the allowance should be increased to at least £20,000.
The Chancellor should extend this relief to apply for three years from the date that the employee arrives in the UK
Extend tax relief for living expenses
Currently, employees seconded to the UK from an overseas employer enjoy tax deductions in respect of accommodation, subsistence and home to work travel. However, the relief only applies for two years from the employee’s date of arrival in the UK and may be denied earlier if, at any point, the employee’s intention to remain in the UK extends beyond two years.
This legislation causes confusion. That is, how do you determine exactly when your intention changes to remain in the UK for longer than two years? Often, these things are not decided formally, but just happen. I have also seen people in the absurd position of having their tax relief denied by HM Revenue & Customs (HMRC) because they have extended their rental agreement for a period, which takes them only one day over the two-year limit (thereby providing HMRC with evidence that the employee changed their intention long before the two year mark is reached).
Furthermore, the relief does not extend to a long enough period, and may deter employers from seconding people to the UK for longer periods, limiting the clear benefits that such secondees bring to the UK economy.
So, the Chancellor should extend this relief to apply for three years from the date that the employee arrives in the UK to reflect the fact that many employers need their employees to go beyond two years in the UK and he should scrap the rules around “intention” to make the relief clear.
Introduce tax relief for private schooling and private medical
Private schooling and private medical can be controversial areas. Certainly, introducing tax free private schooling and private medical for UK employees would be an unlikely political move, whether you are an advocate or not.
However, I would make the case that the position is different for employees seconded to the UK. Why? Because there are a multitude of reasons why private schooling is in many cases the only viable option for the children of international secondees. This includes the fact that greater flexibility is often required to adapt to the disruption of moves part way through an academic year, because the barriers of distance mean that parents are less likely to have the time to find the right state school and, for some, it is important for their children to be enrolled in a school which offers a similar syllabus to that offered in their home country.
Similarly, with private medical, I think there is a particular need for international employees and their families to hold private medical insurance when they are overseas. Firstly, employees want the reassurance that they are completely covered from a medical perspective in the UK in case anything happens. In addition, many employees want support that is not provided by the NHS, for example emergency repatriation to the employee’s home county.
So, I would like to see the Chancellor introduce tax relief for employees seconded to the UK for employer provided private schooling and private medical insurance. This could be time limited to, say, three years from the date that the secondment commences.
Closing thoughts
With ambitious spending plans, there may be limited appetite for additional costs by extending tax reliefs in this area. However, this would be a missed opportunity. Whilst the world is watching the first budget of this new government, introducing even a limited package of measures aimed at international employers and their secondees will send a big message that we want talent to come and work in the UK and that we are still open for business.
For more information, please contact Lee McIntyre-Hamilton.
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