Impact assessment

Termination Awards and Sporting Testimonials: initial equality impact assessment

Published 18 August 2021

Project objectives

Termination Awards

At Autumn Budget 2018, the government announced that from April 2020, it would bring closer alignment to the treatment of termination awards for both income tax and National insurance contributions (NICs) purposes. This will entail imposing an employer Class 1A NICs those awards above £30,000 which are already subject to Income Tax but not Class 1 NICs.

The existing £30,000 Income Tax exemption on termination awards will be applied for NICs purposes and employees will therefore continue to benefit from an unlimited employee NICs exemption for awards associated with the termination of employment. This will ensure that those who lose their job will be supported through the tax and NICs system.

An employer will be required to pay Class 1A NICs on any part of a termination award that exceeds the £30,000 threshold. This will be collected in ‘real-time’, as part of the employer’s standard weekly or monthly payroll returns and remittances to HMRC. Where taxable benefits in kind are provided as part of a termination award, they will incur a Class 1A liability which will not be paid and reported through real time. Instead the annual P11D(b) provisions will apply to those particular Class 1A liabilities.

Sporting Testimonials

The Finance Bill 2016 provisions confirmed that all income from sporting testimonials and benefit matches for an employed sportsperson would be chargeable to income tax. This treatment is subject to a ‘one-off’ exemption of £100,000 of the income received from fund raising events held during a single testimonial or testimonial year.

This ensures that employed sportspersons who, may be coming to, or have already reached, the end of their playing career are protected from these changes. Where there is a contractual entitlement or customary right for the sportsperson to receive a sporting testimonial then this exemption will not apply.

The National Insurance Contributions (Termination Awards and Sporting Testimonials) Act 2019 introduced changes to the treatment of sporting testimonial payments for the purpose of National Insurance contributions (NICs).

This was undertaken to bring closer alignment between the tax treatment of testimonials and the NICs treatment. From April 2020, income arising from non- contractual and non- customary sporting testimonials that is over the £100,000 threshold (which also applies for income tax purposes) will incur an employer Class 1A NICs liability.

As with the Class 1A liability that will arise on certain termination payments from April 2020 onwards, the Class 1A liability arising on Sporting Testimonial Payments will be reported and paid through real time. Any Class 1A liabilities arising on taxable benefits in kind provided to the sportsperson, will be paid and reported through the existing P11D(b) process.

These changes will comply with the HMRC digital strategy and “digital by default” aspirations.

The project will ensure suitable compliance measures and HMRCs promote, prevent and respond principles will be applied, where feasible.

Customer groups affected

The customer groups that will be impacted by the change are:

• employers
• payroll providers
• agents
• employees
• independent sporting testimonial committees (ISTCs)
• third party software developers and providers

What customers will need to do

What customers need to do as a result of the change

An employer/sporting testimonial committee will be required to pay Class 1A NICs on any part of a termination award or sporting testimonial payment that exceeds the £30,000/£100,000 thresholds.

Agents and employees will need to be aware of the new legislation.

ISTCs which are making a non-contractual or non-customary testimonial payment to a sportsperson will need to understand the new legislation and their new requirement to register for PAYE whenever they have to report income tax and Class 1A liabilities arising on a sporting testimonial payment they are making to a sportsperson.

Third party software providers and developers will need to understand the additional RTI reporting requirements which will entail reporting Class 1A liabilities which are presently not paid and reported through RTI and they will need to implement changes to their payroll software products before 2020 to enable the reporting of these Class 1A liabilities.

How customers access this service

This will be reported and paid through ‘real-time’, as part of the employers’ standard payroll returns and remittances to HMRC. Class 1A liabilities arising on taxable benefits in kind provided to the employee or sportsperson it will need to be reported and paid using the established End of Year P11D(b) process.

When customers need to do this

Weekly or monthly in line with the employers’ standard payroll return submission from April 2020.

Assessing the impact

We assessed the equality impacts on all the protected characteristic groups in line with the Equality Act and Public Sector Equality Duty; and Section 75 of the Northern Ireland Act.

Racial groups

Impact on customers

There is no evidence to suggest any specific impacts on those customers within this protected characteristic group.

Disabled and not disabled

Impact on customers

Some: consideration should be given to those customers who use screen readers to access digital content.

Consideration should be given to potential accessibility issues for customers within this protected characteristic group.

For Termination Payments there is no evidence to suggest any specific impacts on those customers within this group.

Mitigation:

• existing guidance/forms can be requested in alternative formats for accessibility
• paper filing route (Paper Capture Tool-PCT) is still operated alongside Basic PAYE Tools for those who do not report digitally
• HMRC offers Extra Support Team services which can be accessed by those customers who cannot, for whatever reason, interact with HMRC digitally or who need additional support and reassurance
• customers also have the option of appointing someone else to deal with their self-assessment transactions on their behalf
• digital content can also be provided in a variety of formats, including hard copy, on request. Formats available include: Braille, Audio, and Large Print. There is also a zoom facility to increase and reduce font sizes within online content
• the Government Digital Service (GDS) assesses and signs off aspects of HMRC’s digital design to ensure that it meets accessibility standards and requirements

Gender

Impact on customers

Some: this policy will have a greater impact on men as their earnings are usually greater than women when it comes to Termination awards. It would not have any impact on sporting testimonials.

Mitigation: none.

Gender reassignment

Impact on customers

None: sensitivity is required around the provision of digital solutions that allow the use of gender-neutral titles.

HMRC is, in the short term, operating a differentiated service for this customer group in order to satisfy data security needs. This may not be welcomed by customers in this protected characteristic group who are keen to interact digitally.

Sexual orientation

Impact on customers

There is no evidence to suggest any specific impacts on those customers within this protected characteristic group.

Age

Impact on customers

Some: customer insight suggests some potential differences in digital access among customers in different age groups for sporting testimonials. It would not have any impact on termination awards.

Mitigation:

• existing guidance/forms can be requested in alternative formats for accessibility
• paper filing route (Paper Capture Tool-PCT) is still operated alongside Basic PAYE Tools for those who do not report digitally.
• HMRC offers Extra Support Team services which can be accessed by those customers who cannot, for whatever reason, interact with HMRC digitally or who need additional support and reassurance
• customers also have the option of appointing someone else to deal with their self-assessment transactions on their behalf

Religion or belief

Impact on customers

Some: the intrinsic values of some religions, such as Judaism (Sabbath) and Islam (Ramadan) limit the times of day or week when customers in this group can interact with HMRC Services.

Some religious groups, such as the Plymouth Brethren, follow rules related to computer use that may affect access to digital services.

Mitigation:

• paper filing route (Paper Capture Tool) is still operated alongside Basic PAYE Tools for those who do not report digitally
• digital provision will offer choice to individuals in this group to self-serve outside of traditional business hours to suit their needs

Pregnancy and maternity

Impact on customers

There is no evidence to suggest any specific impacts on those customers within this protected characteristic group.

Marriage and civil partnership

Impact on customers

There is no evidence to suggest any specific impacts on those customers within this protected characteristic group.

People with dependents and those without

Impact on customers

There is no evidence to suggest any specific impacts on those customers within this protected characteristic group.

Political opinion (for Northern Ireland only)

Impact on customers

There is no evidence to suggest any specific impacts on those customers within this protected characteristic group.

People who use different languages (Including Welsh Language and British Sign Language)

Impact on customers

The Testimonial Awards and Sporting Payments population consist of diverse people who use different languages (including Welsh Language and British Sign Languages).

Mitigation

Welsh language unit advice that each business stream will have the responsibility of ensuring that Welsh versions of their communications are considered and applied appropriately. Project team will ensure this message is communicated to all affected line of business. Updates to GOV.UK will be translated into Welsh as per established protocol.

Opportunities to promote equalities

We have considered opportunities to promote equalities and good relations between people in each of the equality groups, but none have been identified within the scope of this project.

A full equality impact assessment is not recommended.