LITRG urges government to consider tax changes in disability work plan

LITRG urges government to consider tax changes in disability work plan

The Low Income Tax Reform Group believes the government should have included tax initiatives in its plans for disabled people and employment

In October 2016, the Department for Work and Pensions published a green paper supporting a vision of “a society where everyone is ambitious for disabled people and people with long-term health conditions, and where people understand and act positively upon the important relationship between health, work, and disability.”

Employment in the UK is at an historic high of 75%, and yet only around half of disabled people are in work. One in six working-age adults report that they have a disability.

The 2016 government paper estimated that ill health among working age people to costs the economy around £100bn a year. It said that if the government could support 1% more eligible Employment and Support Allowance customers to find work in 2018-19, it would bring an estimated saving of £240m and a £260m boost to the economy.

Under their manifesto, the current government pledged to see 1 million more disabled people in work over the next 10 years, increasing the number of disabled people working from 3.5m in 2017 to 4.5m in 2027.

Plans for the future

A government paper published in November 2017 has set out three focus areas following a number of tax changes announced in the Autumn Budget.

Firstly, there should be a sustainable welfare and employment support system. The system would need to operate in cooperation with the health system and as part of strong wider local partnerships to move people into work when they are ready.

In addition, focus should be placed on the role that employers play in the workplace. The government has highlighted recruitment, retention, and managing employee illness as well as creating healthy and inclusive workplaces for staff to thrive as critical areas of focus. The report also recommended that employers should work on creating more opportunities for people who need a flexible working approach.

The report identified health services as the final area of focus. It said that healthcare professionals need to be ready to talk about health barriers to work, and there should be a focus on prevention and early intervention. All individuals should have timely access to appropriate treatments, and there needs to be effective occupational health services both within and beyond the NHS, and including small businesses and the self-employed.

According to the government’s strategy, “everyone has their own part to play to achieve this ambitious vision for a society in which all disabled people and people with long-term health conditions are able to go as far as their talents will take them”.

LITRG’s response

The Low Income Tax Reform Group (LITRG) mostly welcomed the government’s new 10-year plan to halve the disability employment gap.

Suggested government initiatives backed by the group included widening “fit note” certification, providing dedicated training for work coaches to support people with mental health illnesses, and the reformation of Statutory Sick Pay.

However, LITRG was disappointed that the government had not taken the opportunity to explore tax reliefs and other tax-related changes which could help more disabled people get into work, and those already in jobs to remain in the post.

Anne Fairpo, LITRG chair, said: “We are disappointed that tax has largely been omitted from the government’s disability work strategy. We think that more generous employment expenses relief and other changes to tax rules, could really help influence behaviour in this area.”

Recommendations

In its response to the government’s original green paper last year, the LITRG highlighted areas in the tax and related benefits system which could prevent disabled people from being employed. These changes related to income tax, VAT, National Insurance Contributions (NICs), and tax credits.

The LITRG recommendations were based on where they believed rules and practice could be changed to improve incentives, reduce burdens, and therefore contribute to the government’s objective.

It suggested that all employed disabled people should be able to expense the costs of putting themselves, as far as possible, on a par with non-disabled people.

For example, if a disabled person is unable to drive to work or travel on public transport, and instead has to use a specialist taxi service, certain employers will cover the transport costs, which are not classed as taxable benefit, and will therefore be tax-free.

However, the disabled worker is unable to claim tax relief if they meet these costs personally. Since inaccessible transport is the second biggest barrier to disabled people working after a lack of job opportunities, the LITRG said that allowing the cost of specialist transport against tax would go some way towards tackling this issue.

LITRG also suggested that there should be VAT relief for modifications in the work place to accommodate disabled people.

Moreover, it recommended that from April 2018, the system of NIC credits should be extended to disabled people whose profits from self-employment do not exceed the small profits threshold.

Finally, LITRG said that HMRC should treat any ”strengthened self-employment” test tax credit cases involving disabled people sympathetically, taking their specific circumstances into account.

The group said that the delivery of HMRC services for disabled people, and how HMRC assesses and monitors their compliance with equality law, should be further considered.

Improving these areas will help to build a sense of trust between HMRC and their disabled customers, making the latter more likely to ask for help in managing their taxes and tax credit affairs.

According to Fairpo, “Having to interact with systems such as telephone voice recognition software and dealing with communications and information that may not be readily available in an accessible or understandable format may go some way to explaining why 26 per cent of the complaints the Adjudicator dealt with in the last year were from people who consider themselves disabled.”

Fairpo added: “Disabled people…need to feel that when they contact HMRC they will be treated not only fairly but flexibly and with empathy and will be able to access a method of contact that suits their needs.”

HMRC has enjoyed a successful year, with tax receipts rising by 6.75%, the biggest leap since the recession.

The LITRG has previously put pressure on HMRC to clarify changes around income allowances to prevent confusion around Self-Assessment regulations.

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