Spring often brings with it an eye to the future and opportunities to forge ahead with new ideas, yet there is a concurrent need for employers to also look back and ensure that they are fulfilling their end-of-year reporting obligations.
This article summarises the reporting obligations faced by employers over the coming months.
Short Term Business Visitors from overseas – filing deadline 31 May
Where an employee from an overseas parent, subsidiary or associated company visits the UK to work for the UK business, the UK business has a PAYE obligation from day 1 regardless of whether a Double Taxation Agreement (DTA) with the UK may remove a charge to income tax on their employment income.
HMRC recognises this administrative burden and allows employers to include such employees on a Short Term Business Visitor Agreement (STBVA). An STBVA means the business will not be required to operate PAYE but instead submit a report by 31 May each year to disclose information about the individuals, and support why their employment income is not taxable in the UK: the greater the time spent in the UK, the more detailed the information to be provided.
Certain business travellers are usually excluded from the STBVA, including employees of overseas branches and non-resident directors of UK companies carrying out directorship duties in the UK.
If the STBVA cannot be used, this may necessitate full UK reporting, or for a special annual PAYE Scheme to be established for individuals who are in the UK for less than 60 days in the tax year and are not liable to UK NIC. This will enable the business to report annually by 31 May each year and settle the PAYE due in a single payment at year end, rather than on a monthly basis.
The complexity is in identifying the different populations of overseas visitors and determining which rules apply in order that the correct approach to reporting is followed. Key to compliance is a robust tracking system and record keeping.
Employee Benefits and Expenses – filing deadline 6 July
Employee benefit reporting through Forms P11D is amongst the most common of tax reporting obligations but repeatedly causes problems for employers in terms of understanding what needs to be included on the forms and where. Changes to working practices in recent times, and related expenses and benefits are creating new challenges for many employers.
The P11Ds must be submitted to HMRC by 6 July each year (with a copy to employees). Employers are also required to complete and return the P11D(b) which calculates employer Class 1A National Insurance Contributions (NIC) due on certain benefits, this includes benefits which have been processed via the payroll under a formal payrolling arrangement (PBIK). Complications with the tax profile of benefits or how they are calculated can cause the filing deadline to be missed or give rise to errors that require later correction e.g. not operating Class 1 NIC via payroll. All of these can give rise to penalties.
Capturing, analysing and processing the relevant data as soon as possible after the tax year end is, therefore, critical. Employers should also take the opportunity to consider whether a different means of reporting minor and irregular benefits to HMRC via a PAYE Settlement Agreement (PSA), may be more appropriate: the deadline to agree or extend a PSA for 2022/23 is also 6 July 2023.
Share Plans and Other Employment Related Securities – filing deadline 6 July
What constitutes an Employment Related Security (ERS) is interpreted widely by HMRC, and share plans or other transactions involving UK employees’ or directors’ shares and securities in the company or wider group are likely to require filing a return by 6 July each year.
Identifying all relevant transactions, how they need to be reported, and by whom is not straightforward, and time is required for this analysis before a company is in a position to file its ERS return via its HMRC PAYE account on the HMRC portal. Late returns trigger automatic penalties, and late certification of tax-advantaged schemes can have more significant consequences.
The 2022/23 reporting year also brings some additional complexities due to further mandatory fields being incorporated into the reporting; companies must now provide NI numbers and PAYE references. We anticipate that this will assist HMRC to cross-check data and where any anomalies arise, they may commence ERS compliance checks. We are already seeing HMRC increasingly looking at the correlation between payroll, corporation tax returns and ERS reporting.
Claire Murray is a director in BDO’s global employer services team