Cross-border employment tax compliance

With the end of the UK tax year fast approaching, we have set out below the key areas that employers with a cross border workforce should now be focusing on.

2024/25 year-end reporting

• Employers with any form of globally mobile workforce whether into or out of the UK should be checking that they are fully compliant in terms of PAYE and National Insurance Contribution (NIC) - social security operation. The tax year end, i.e. month 12, is a good opportunity to review your globally mobile workforce to ensure you have taken the necessary steps to capture all data and take appropriate action in terms of operating PAYE and NIC.
• Broadly speaking, all compensation – wherever it is paid - needs to be reported for PAYE and NICs, unless you have agreed with HMRC to operate it on a reduced basis. This compensation needs to be reported accurately and in real-time, unless you have agreed with HMRC to report on a best estimate basis. 
• Employers may also have UK payroll reporting obligations in respect of business visitors to the UK, unless a Short-Term Business Visitors Agreement (STBVA) is entered into with HMRC. Caution should be taken here, as not all business visitors may be covered by STBVA. In respect of those visitors who are not covered, there is the option to operate a more relaxed form of payroll reporting, but again prior agreement needs to be obtained from HMRC. 
• Employers in the UK should also check whether they have any directors who are based abroad but make visits to the UK to perform their UK board director duties. These activities are likely to trigger tax liabilities and payroll obligations in the UK. If so, the Month 12 payroll can be used as an opportunity to address this. 
• With a scarce talent market, cross-border remote working arrangements continue to gain traction amongst employers of all shapes and sizes, while at the same time the more classic cross-border deployment of staff within multinational organisations continues to rebound strongly. It is important to note that both cases can create potentially unexpected payroll obligations for employers. Not meeting these obligations can expose the employer to significant payroll compliance risks (including penalties and interest) and the approach of the tax year-end should focus the mind on what payments and expenses need to be reported before the payroll closes. Note that action may be required in more than one country – in the case of remote workers, the employment and work location.
• Employers both in and outside the UK should consider whether any benefits in kind have been provided to UK employees/secondees and if so, what the reporting obligations are (Form P11D) and any Class 1A NICs due thereon. In addition, any benefits that are provided on a more general basis (such as staff entertaining, gifts and vouchers) are normally accounted for via a PAYE Settlement Agreement (PSA). A PSA is an annual arrangement with HMRC to settle the liability arising on behalf of the employees.
• It is also the time to collect and capture any information that needs to be disclosed in relation to employment related securities. The online reporting for both this and the approved schemes like Enterprise Management Incentives (EMIs) can take time to pull together and submit before the deadline. 

Conclusion

HMRC understand the complexity around globally mobile employees and continue to target this population as part of tax compliance audits. Review and action are essential, particularly toward year-end. Having gaps in this area is a red flag to fiscal authorities and can lead to scrutiny into other areas of the organisation. Dedicating time and attention to this area will be key to ensuring risk and costs are appropriately managed.

If you would like to discuss further, please do not hesitate to contact Kenny Law or a member of your Crowe team.