Employment tax compliance

Employment tax compliance

What employers need to focus on

Kenny Law, Senior Manager, Global Mobility Services
02/03/2022
Employment tax compliance
With the end of the UK tax year fast approaching, we have set out below the key areas that employers should now be focusing on.

2021/22 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 National Insurance Contributions (NIC), also known as 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 (STBV) Agreement is entered into with HMRC. Caution should be taken here, as not all business visitors may be covered by a STBV 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.  
  • Employees who normally work abroad but have been stranded (and therefore working) in the UK in the past year may also be subject to a UK payroll reporting requirement. Where this is the case, similar considerations (to those governing business visitors to the UK) will apply. 
  • 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.

Remote workers

  • With COVID-19 restrictions having all but subsided in the UK, concessions relating to the work from home allowance and the provision of work from home equipment are due to end in April 2022. Employers and their employees should therefore exercise care if such reliefs will continue to be claimed from April 2022 onwards.
  • We are finding that more and more employees are looking to work remotely from outside the UK on a permanent basis. Where this is the case, 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.  
  • An increasing number of employers are looking to embrace cross border remote working within their organisations. For these employers, establishing a policy or framework that regulates this new landscape should be considered a priority.

Health and Social Care Levy

  • On 7 September 2021, the government announced a new 1.25% Health and Social Care Levy to fund investment in the NHS, health and social care. The Levy is effectively introduced from April 2022 when National Insurance contributions for employees under State Pension age, self-employed people and employers will increase by 1.25 percentage points and be added to the existing NHS funding allocation.
  • Employers should ensure that all payslips to affected employees between 6‌‌‌ ‌‌April 2022 and 5‌‌‌ ‌‌April 2023 not only incorporate the 1.25% uplift, but also include appropriate messaging to explain the increased National Insurance contribution.
  • From April 2023, the Levy will be formally separated from National Insurance contributions and will also apply to the earnings of individuals working above State Pension age. National Insurance contribution rates will then return to 2021 to 2022 levels and receipts from the Levy will go directly for spending on health and social care.

Off Payroll Working (IR35)

  • The new off payroll (IR35) rules have been in force for almost a year now, which impact the engagement of individuals through personal service companies or other intermediaries.
  • These rules shift the responsibility for determining if the off-payroll working rules (IR35) apply, 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).
  • 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.

Conclusion

To ensure 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 towards year end. If you would like to discuss further, please do not hesitate to contact a member of your Crowe team.

Insights and news

IR35 difficulties continue to hurt Government as HM Courts and Tribunal Service suffered a £12.5 million tax bill.
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.
A reminder about the UK payroll compliance requirements in respect of Short-Term Business Visitors to the UK.
IR35 difficulties continue to hurt Government as HM Courts and Tribunal Service suffered a £12.5 million tax bill.
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.
A reminder about the UK payroll compliance requirements in respect of Short-Term Business Visitors to the UK.

Contact us

Dinesh Jangra
Dinesh Jangra
Partner, Global Practice Leader for Global Mobility
London