You always need to prepare for your year-end tax reporting, but hybrid working and successive Budgets, including several U-turns, are adding even more complexity this year.
This is the time for employers to turn their attention to annual filings of upcoming employment tax compliance deadlines for 2022/23 - and start thinking about 2023/24.
Changes in reporting employee benefits
Employers should be aware that from 6 April 2023 HMRC will no longer accept the informal payrolling of benefits. If employers wish to payroll their benefits, they must register with HMRC to do so. Benefits based on existing informal agreements with HMRC for the 2022/23 tax year can still be submitted as P11Ds marked ‘payrolled’, but this should be formalised as soon as possible.
For employers who haven't registered to payroll their benefits, all P11D and P11D(b) reporting must take place online from 6 April 2023. HMRC will no longer accept paper P11D and P11D(b) forms. They also need to remember that even where they payroll benefits, a P11D(b) is still required to be filed and the Class 1A NIC paid after the tax year.
Changes to Employment-Related Securities annual filings templates
The Employment-Related Securities (ERS) annual filing requirements cover a broad category of events, whether part of a specific incentive scheme or more informal transaction.
While the reporting requirements have not changed, the ERS annual filings templates have changed from 6 April 2023. Completion of certain fields have now become mandatory for all ERS returns submitted from this date. Further changes have also been made to clarify column headings.
For those unfamiliar with the requirements, HMRC will not issue a notification or reminder that a return is required. Employers are required to take specific action to first register on the PAYE online portal to make these filings.
National minimum wage rise
HMRC continue to strictly enforce the national minimum wage rules which can be complex to comply with. The actual rate increased to £10.42 per hour on 1 April 2023, with the headline national living wage rate rising to £10.42 per hour. Employers should take particular care that sufficient measures are in place to ensure they don't inadvertently pay their employees at a rate below the minimum wage threshold. This includes making sure all working time, including overtime is documented and paid correctly as well as any salary sacrifices. Employers should ensure that they have a robust system within their payroll, which is followed and regularly reviewed.
Hybrid working, home-working, and working from anywhere
Whether employers are incentivising their employees back into the workplace for a greater amount of time than previously or offering a work from anywhere remote hybrid-working policy, the employment tax reporting and costs considerations should be worked through in advance to avoid any surprises. Recommended actions may include implementing return-to-work policies and reviewing previous policies in light of the changing workplace rules and rising costs of living. There may also be corporate risks, such as permanent establishment and corporate residency.
The tax treatment of home-working expenses has also changed within the past year and expenses policies haven't always remained up to date. With year-end reporting on the agenda, they should ensure correct reporting from a payroll as well as P11D and PAYE Settlement Agreement (PSA) perspective.
Tax risk: controls and governance
Tax risk can be a particular headache for employers. This is heightened when undergoing periods of change, such as mergers, acquisitions, investments or funding. Large businesses should be aware of the requirements placed upon them by the senior accounting officer (SAO) and Business Risk Review+ (BRR+) regimes, although ensuring that adequate controls are in place to minimise risk should be a priority for all employers. The Corporate Criminal Offences (CCO) legislation places responsibility upon all businesses to implement procedures to prevent any associated persons from criminally facilitating tax evasion. With potentially unlimited fines for any business found guilty of the offence, it is crucial for employers to implement and regularly review their policies.
IR35 also remains a key governance issue for all employers, with HMRC actively investigating compliance with the rules. They have been focusing on off-payroll policies and processes. Employment tax health checks, which evaluate all of these risk areas, should be undertaken on a regular basis, and when there are changes in the business. This will allow employers to have confidence that their procedures are sufficiently robust, and that they're meeting their employment tax compliance responsibilities.
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Employment tax compliance: key deadlines
As the cost-of-living crisis continues to bite, employers are feeling the pressure of increasing costs, directly impacting both their business and their workforce. Attention is turning to annual filing requirements for 2022/23 with HMRC.
An agreement with HMRC for an employer to settle tax and NIC liabilities will be due on behalf of their employees on minor or irregular taxable benefits, or where it's impractical to operate PAYE, eg, staff entertainment and gifts. A PSA must be agreed with HMRC by 5 July 2023, which is also the deadline for adding new items to a PSA for the 2022/23 tax year.
For employers providing incentive awards to employees of a third party, a TAS is an equivalent voluntary agreement to settle the tax and NIC due which needs to be agreed and completed by 6 July 2023.
These are voluntary agreements with HMRC to relax the otherwise strict PAYE withholding requirements on payments to certain business visitors to the UK. Complex conditions must be met but there are significant advantages in terms of risk and administration reduction. The 2022/23 STBV Report(s) must be filed by 31 May 2023.
These are used to report taxable expenses and benefits provided to employees and report the Class 1A NIC payable by the business. Even where businesses voluntarily payroll their P11D benefits, the P11D(b) must still be filed by 6 July with payment of the Class 1A NIC by 22 July. If a business wishes to formally payroll their benefits the deadline for notifying HMRC is 5 April prior to the start of the relevant tax year. Employers must also notify their employees of the change.
Employers are required to report to HMRC details of all employee/director share and share option transactions that have taken place during the tax year, whether via an employee share plan or any other arrangement. The return must be submitted annually by 6 July using the online ERS portal.
Businesses should also be aware that HMRC has issued updated templates to be used for ERS return submissions from 6 April 2023 onwards.
When the employment of an employee or director is terminated, but they continue to be provided with a taxable benefit in kind, the reporting of the benefit differs to standard form P11D reporting. Employers are required to make a report to HMRC for termination packages exceeding £30,000, which are inclusive of non-cash items. Reports must be made by 6 July following the end of the tax year.
Final payroll reports must be submitted to HMRC by 19 April 2023. Form P60s must be provided to employees (and any off payroll workers on the payroll as deemed employees under the IR35 legislation) by no later than 31 May 2023.
Employers who payroll their benefits in kind must provide employees with details of by 1 June 2023. The Class 1A NIC due on payrolled benefits must be included on the form P11D(b) due by 6 July 2023.
There are a number of other specialist employer compliance returns and reports that sit outside of the normal employer compliance timeline. They may not apply to all businesses, but where they do apply, failure to comply may bring significant penalties.
Construction industry scheme (CIS)
Businesses that are mainstream or deemed contractors for the purpose of CIS must submit monthly returns of payments made to subcontractors. CIS returns are due by the 19th of every month following the last tax month.
Gender pay gap reporting
Employers with 250 or more employees on a specific ‘snapshot’ date each year must report and publish their gender pay gap data. Reports must be made within a year of the snapshot date.
How Grant Thornton can help
Our employer solutions team has extensive experience in assisting businesses of all sizes and sectors to prepare their employer compliance returns and to provide specialist tax advice. We provide a bespoke service, which focuses on ensuring that we understand our client’s business and operations to allow us to accurately complete all applicable returns and to ensure all available exemptions are considered.
Get in touch with your usual Grant Thornton contact or one of our subject matter experts in our employer solutions team to find out how we can help your business.