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News & Insights

End of the tax year – Employer Compliance

13 March 2023
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As we approach the end of the tax year, employers will be preparing for their end of year payroll obligations. Listed below are some of the planning and compliance related matters that employers and employees may need to think about. Contact us to know more about how we can help you with your tax, accounting, payroll and prudential requirements. 

Employer Planning Highlights

Consider applying for a Short Term Business Visitor Concession for employees expected to stay in UK for less than 183 days in a 12 month period

If you have or plan to have employees visiting from overseas to work as part of your UK workforce, then whilst they may remain employed outside the UK; if they are being managed in the UK or are part of a UK team there could be a PAYE reporting obligation on the UK business. This obligation may arise from the first day of work in the UK. HMRC refer to visiting employees as short term business visitors (“STBV”).

The PAYE rules for a STBV, however, can be relaxed if the UK employer asks HMRC to apply STBV concessions. HMRC may grant this concession where an STBV is:

  • Tax resident in a country with which the UK has a Double Tax treaty under which the Dependent Personal Services/Income from Employment article (Article 15 of the OECD Model Tax Convention, or equivalent) is likely to be competent.
  • either (a) coming to work in the UK for a UK company or the UK branch of an overseas company or (b) legally employed by a UK resident employer, but economically employed by a separate non-UK resident entity;
  • expected to stay in the UK for 183 days or less in any 12-month period.

Organisations are required to execute an agreement with HMRC which requires annual reporting of business visitors in exchange for a relaxation of the PAYE obligation (by 31 May following the end of the tax year).

  • Ongoing tracking of Business Travellers is required to make the annual reports and to reduce the reconciliation exercise that can be needed at year-end should relevant information not be easily accessed.
  • If the cost of remuneration for an STBV is ultimately borne by the UK company and not recharged to the overseas employer, the STBV cannot be included in the arrangement, unless they have been in the UK for fewer than 60 days. HMRC also highlight the correct application of the 60 day rule and how this should be applied. It’s important when considering this 60 day period to note that it is not limited to a single tax year i.e. it can apply across tax years.

Employee Planning Highlights

Overseas workday relief

A special relief called overseas workday relief, could allow employees who recently came to the UK; carry out their duties both in and out of the UK under a single employment contract; and do not remit their overseas earnings to the UK; to be received free from UK tax. This only applies to employees in the first three years of becoming UK resident for tax purposes.

Detached Duty Relief

For employees that are seconded by an overseas employer to its UK operation for a period of up to 24 months; the cost of their travel and accommodation would not be subject to UK income tax and NIC on such individuals. This relief is known as detached duty relief and can be a substantial saving for the employee

Employer Compliance Related Matters

Employment related securities (“ERS”) – due date for submission 6 July

UK employers have an annual obligation to disclose certain shares or securities transactions that occurred during the tax year involving their employees and directors. The definition of securities for these purposes also includes units in a collective investment scheme which includes a partnership interest in a carried interest LP (but remember, separately, that the income based carried interest rules do not apply where the carried interest is an employment related security). The deadline for disclosing employment related security transactions is 6 July following the end of the tax year. Even if no reportable transactions took place during the tax year, you will still need to submit a nil return if you are registered with HMRC for ERS filing.

PAYE settlement agreements (“PSA”)

Many employers will know that by 31 May 2023, they will need to provide their employees with a form P60; and by 6 July 2023, P11D forms need to be submitted to HMRC and employees in respect of employment benefits and expenses. 

It can sometimes be missed that staff entertainment and gifts to staff are also employee benefits. Subject to certain exemptions, these expenses could therefore be taxable on employees (and reportable on a P11D). In the past some employers may have taken the view that by disallowing the staff entertainment costs in the computation of taxable trading profits, this will avoid the need to treat it as a reportable benefit. This is not the correct approach.

However, employers can enter into an agreement with HMRC (called the PAYE Settlement Agreement (“PSA”)) which allow employers to make a payment in respect of tax and national insurance arising on minor, irregular or impracticable expenses or benefits for employees (e.g. staff entertainment).  Employers need to apply for a PSA before 5 July and PSA tax and NIC need to be paid by 22 October.

Please feel free to contact Sutharman Kanagarajah for more information about this matter.