The range of rules and risks in employment tax can be daunting. Jonathan Berger shares the key compliance guidance from our September workforce-planning in practice webinar.

Staying up to date on pay and governance, including the National Minimum Wage, off-payroll working, cross-border working, and HMRC priorities helps you stay compliant and minimise potential penalties. If you missed our latest webinar on pay and governance you can catch up on the most important points here — and then access the full recording.

National Minimum Wage (NMW)

Phil Cavill explained that NMW compliance is more complex than many employers realise.

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What do NMW rules cover?  

  • How pay is calculated
  • How workers are classified
  • How time is recorded

Common practices like salary sacrifice schemes, misclassification of worker types, and poor timekeeping can inadvertently lead to underpayments.

"Core to governance of risk in this area is the NMW calculation, this is the foundation upon which compliance is built. It’s not just about the hourly rate—it’s about how pay is calculated over a 'pay reference period'.’’

With HMRC intensifying enforcement—especially through the Geographical Compliance Approach (GCA) —businesses must act.

The cost of getting it wrong can be high:  

  • up to 200% penalties 
  • reputational damage through public naming 
  • significant costs for arrears repayments.
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"HMRC has significantly intensified its enforcement efforts around National Minimum Wage….Recent initiatives include the Geographical Compliance Approach (GCA), sector targeting and responding to worker or third-party complaints.’’

There's a window of opportunity

HMRC’s ‘nudge’ letters offer a chance to self-review and correct issues before formal enforcement begins.

Key takeaways and next steps

NMW compliance involves detailed calculations based on pay reference periods, worker types, and actual hours worked.

Salary sacrifice, excess salaried hours, and unrecorded time (eg, changing into workwear) are frequent pitfalls.

Enforcement budgets and officer numbers have increased significantly. GCA targeting means local businesses are under the microscope.

If you’ve received a nudge letter, now is the time to self-review and correct underpayments—before penalties and naming apply.

How we can help

1.

Support with HMRC reviews and communications

2.

NMW risk diagnostics and self-review assistance 

3.

Training and workshops for internal teams 

4.

Strategic advice on governance and controls

Off-payroll working

This continues to be an area of focus by HMRC and one where employers often don’t have updated processes and robust controls in place. 

Tonia Danez reminded us of HMRC’s guidance and expectations as well as compliance activity, including HMRC-issued off-payroll working questionnaires. 

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HMRC has published additional guidance to support compliance which recommends that businesses introduce:  

  • governance toolkits 
  • technical training for employees involved in compliance processes 
  • formally-documented process maps 
  • well-maintained risk and control matrices.  

It’s important to ensure robust risk management, documented processes, and upskilling personnel for ongoing compliance.

"Looking ahead, if you use contractors, now is the opportune time to revisit your OPW IR35 governance not only to prepare for the new umbrella company changes, but to ensure that compliance processes and controls remain effective for OPW and IR35 purposes. April 26 will mark five years since the IR35 changes for the private sector were introduced, and a prudent question should be asked to challenge whether your processes remain fit for purpose.”

HMRC compliance focus

A robust governance framework is key to mitigating potential employment tax exposures. Hana Cincalova highlighted the employment tax areas where businesses are most likely to encounter scrutiny from HMRC and common risks.

Key risk areas:  

  • Expenses and benefits: the importance of documented and consistent policies, clear audit trail and regular training to ensure compliance.
  • Termination payments: awareness of tax technical position in relation to each element of pay.
  • Office holders and non-resident directors: the intersection of employment status and IR35.

Strengthen your compliance through:  

  • periodic policy review and update
  • documentation and audit trail
  • regular and targeted training
  • audit and assurance.
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“We have experienced HMRC utilising various channels to get a foot in the door and some businesses do not realise how many checkpoints there are and how easy it is for HMRC officers to discover non-compliance.”

Cross-border working and NIC updates for mobile employees

Chris Girdlestone reminded us about the complexities in travel expenses and reliefs introduced by the foreign income and gains (FIG regime) on 6 April 2025, and explained how they're creating additional risk for businesses with cross-border workers. 

The qualifying criteria for certain travel and subsistence expenses (including 'home leave') has changed. Employers need to ensure their expense policies correctly analyse eligibility so relief is only claimed where appropriate, and non-qualifying amounts are reported properly. The changes took immediate effect, with no transition period for those previously qualifying under the old rules, so any analysis undertaken before the changes should be revisited. Resident non-domiciled individuals who were previously entitled to relief on qualifying home leave expenses for five years may now only receive relief for four years if they qualify for the FIG regime. If residents don't qualify for it, relief stopped immediately when it came into force. Care is also needed for related costs, such as visas, which aren't always qualifying.

Are you compliant with post-FIG travel expense rules?

Are you compliant with post-FIG travel expense rules?

Matthew Wilson and Katy Bond explore key considerations for businesses to ensure accurate capture of travel expenses under the new rules.

    Laura Hutton discussed HMRC's announcements on the apportionment of NIC for internationally-mobile workers coming to the UK, which also applies retrospectively. 

    Employment tax and global mobility

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    If anything here has raised questions — whether that’s clarifying key points, exploring next steps, or accelerating progress, get in touch. We understand that it’s often the small details that make a material difference to your business, and we’re here to help with both your immediate challenges and create long-term value.

    “to summarise, for effective employment tax governance and in order for employers to manage their key risks, having access to clear data….and having robust processes to underpin that is key along with awareness of the issues…. those issues can be quite complex, so being prepared is very important.”

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      Our expert contributors

      Tonia Danez - Associate Director, Employment Tax
      Phil Cavill - Manager, Employer Solutions
      Chris Girdlestone - Associate Director, Global Mobility Services
      Hana Cincalova - Manager,  Global Mobility Services
      Laura Hutton - Director, Global Mobility Services 

      For more insight and guidance, get in touch.

      Jonathan Berger
      Jonathan Berger
      Director
      London
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