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Employment tax compliance obligations

What employers need to focus on

Kenny Law, Senior Manager, Global Mobility Services
09/03/2021
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It has been a turbulent past 12 months, with employers having to tackle a number of unprecedented challenges created by the ongoing pandemic. Despite this, employers will still need to meet their employment tax compliance obligations and we have recently seen a number of compliance communications issued by HMRC to employers, which shows a renewed drive by the UK government to ensure compliance in this area. Given this, and that the end of the current UK tax year is fast approaching, we have set out below the key areas that employers should now be focusing on.

2020/21 year-end reporting

  • Employers with any form of globally mobile workforce (into or out of the UK) should be checking that they are fully compliant in terms of PAYE and 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 - regardless of where 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 is entered into with HMRC. Caution should be taken here, as not all business visitors may be covered by a Short Term Business Visitors Agreement. In respect of those visitors who are not covered, there is the option to operate a 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.
  • 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 business (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.

Brexit and social security 

  • From 1 January 2021, social security for EU and UK workers is governed by the new EU-UK Trade & Cooperation Agreement. As such, employers with UK staff who start working in the EU (or vice versa) from 1 January 2021 should check whether they can obtain the necessary certificates to avoid double social security charges.

Remote workers

  • Workforces around the world have now been working remotely for the best part of a year. As an employer, are you aware of the tax reliefs that may be available to you and your employees who work from home?
  • If your employees are working from their home outside the UK, various obligations and liabilities may be inadvertently triggered, at both employer and employee level, spanning across a number of disciplines including tax, labour law and immigration. As each country has its own rules, unfortunately there is no one size fits all solution, so a case by case approach would be needed to ensure appropriate resolution.  
  • For many organisations, new ways of flexible working will become the norm. For employers who see this as the direction of travel in their organisation, establishing a policy and framework that regulates this new landscape should be considered a priority.

Off Payroll Working (IR35)

  • As many employers will already be aware, from 6 April 2021 the rules for engaging individuals through personal service companies or other intermediaries will change.
  • Crucially, this means the responsibility for determining if the off-payroll working rules (IR35) apply, will move to the organisation receiving an individual’s services.
  • If the new rules apply, then a PAYE obligation arises and this may be the responsibility of the end client receiving the services, but it could also be an intermediary in the engagement chain (e.g. an agency).
  • As a priority, employers should take the time to understand the impact of these changes on their organisation and the actions that may need to be taken before these changes are implemented on 6 April 2021.
  • Please note that although not affected by the IR35 changes, normal Employment Status (whether a worker is employed or self-employed) remains unchanged and is still a high risk area that HMRC do review. Employers should continue to assess such workers who are engaged to be sure the correct employment status has been applied.

Coronavirus Job Retention Scheme (CJRS)

  • Following announcement of the UK Budget, the CJRS has been extended to 30 September 2021.
  • HMRC have already commenced compliance reviews into claims made by employers.
  • Employers that have used/are using the CJRS should ensure suitable internal audits are undertaken to confirm amounts claimed from HMRC are correct. Any amounts found to be over-claimed, should be disclosed and repaid to HMRC as soon as possible.

Termination payments

  • Due to the pandemic and impact on businesses, many employers have had to make the difficult decision to downsize the workforce.
  • Care should be taken when such arrangements involve termination payments, as there have been significant changes to the tax and NICs treatment of such payments.

Conclusion

To ensure extra cost and risk is appropriated managed, staying on top of your existing compliance obligations and getting to grips with the changing compliance landscape should be high on the agenda for all HR and finance personnel, particularly in the coming weeks and months. If you would like to discuss further, please do not hesitate to contact a member of your Crowe team.

Insights and news

Virtual assignments play a big part in the future of global mobility, employers now need to look at how they can operate overseas.
Are you ready for the reporting deadline of 31 May 2020 in respect of Short Term Business Visitors to the UK.
Do you know your obligations regarding PAYE and NI for globally mobile employees.
Crowe were delighted to be named the winner of the Global Payroll Awards 2020, Global Mobility Provider of the Year.
Virtual assignments play a big part in the future of global mobility, employers now need to look at how they can operate overseas.
Are you ready for the reporting deadline of 31 May 2020 in respect of Short Term Business Visitors to the UK.
Do you know your obligations regarding PAYE and NI for globally mobile employees.
Crowe were delighted to be named the winner of the Global Payroll Awards 2020, Global Mobility Provider of the Year.

Contact us

Dinesh Jangra
Dinesh Jangra
Partner, Head of Global Mobility
London