13 March 2023 • Tax
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:
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).
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.