Benefits and more: how to stay compliant in reporting

TaxTalk - March 2024

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As the 2023/24 tax year comes to an end, we provide key reminders and deadlines for employers to report accurately and on time.

1. Benefits in kind (BiKs) to employees

If you are an employer providing benefits or covering certain expenses for employees, you must send annual returns to HMRC, and make associated tax and National Insurance payments.

1.1 Forms P11D

Employers must report non-payrolled taxable expenses and BiKs using forms P11D/P11D(b). The deadline to submit these forms to HMRC is 6 July following the end of the tax year, with the payment of employer Class 1A NICs due by 19 July (22 July for electronic payments).

1.2 PAYE Settlement Agreements (PSAs)

A PSA is an agreement entered into between an employer and HMRC. Its purpose is to cover all the tax and National Insurance due on minor, irregular or impracticable expenses or benefits for employees which are neither payrolled nor included on the P11D. A PSA is often used to cover staff entertaining, where the employer does not want the employee to incur a tax charge on what is essentially a ‘thank you’.

The application deadline for a 2023/24 PSA is 5 July 2024, with Income Tax and Class 1B NICs payment due by 19 October 2024 (22 October2024 for electronic payments).

1.3 Payrolling BiKs

Payrolling of benefits has been an option for employers for a few years now. All benefits can be put through payroll except employer-provided living accommodation and interest free/low interest loans.

Currently companies can choose to payroll benefits in kind but they must still complete a form P11D(b) and submit it by 6 July following the end of the tax year. Employers should also calculate Class 1A NICs. This means tax deductions are more accurate, as any adjustments to an individual’s tax code are made in real time rather than at the end of the year when the P11D is submitted.

When opting to payroll benefits, you must register and notify employees in writing of your intention. You must send the notification by 1 June after the end of each tax year.

For those opting to payroll benefits for the 2024/25 tax year, the registration deadline is 5 April.

In a bid to simplify the tax system, HMRC has recently announced that the payrolling of BiKs will be compulsory from April 2026.  The legislation is yet to be drafted and approved, but we encourage you to think about what you can do now to make the transition easier. We are happy to help with this, if you would like to explore the options.

2. Employment related securities (ERS)

Employers operating a share plan or engaging in equity transactions with UK employees must report all transactions using the ERS return online. The submission deadline for the 2023/24 tax year is 6 July 2024.

Reportable transactions include acquisition of securities, vesting and exercise of securities, and taxable disposals of shares.

Employers must register each plan or arrangement with HMRC via the ERS Online Services. If there haven’t been any reportable events during the tax year, a nil submission is still required.

For internationally mobile employees, the ERS reporting may be more complicated. The tax and social security treatment of the equity income will need to be determined based on the employees’ tax residency and social security position throughout the relevant sourcing period.

3. Internationally mobile employees

There are specific reporting requirements for employers with internationally mobile employees, depending on their circumstances.

3.1 Modified payrolls

For expatriate non-domiciled employees under a tax equalisation agreement, the Appendix 6 modified payroll arrangements provide flexibility.

Under the scheme, HMRC allows the employer to report estimated UK taxable income on the payroll during the tax year and reconcile at the end of the tax year. The reconciliation payroll submission must be completed by 19 April, with the tax payable on the same day (22 April for electronic payments).

Similarly, the Appendix 7a or Appendix 7b arrangement with HMRC allows employers to pay estimated National Insurance Contributions (NICs ) for expat employees during the tax year. Employers must submit the NICs Settlement Return and pay any outstanding NICs by 31 March.

3.2 Short-Term Business Visitors (STBV)

For overseas employees visiting the UK for business from countries with a double taxation agreement with the UK, the payroll obligation can be relaxed if the employer has an STBV Agreement with HMRC. The agreement requires annual reporting. The deadline for submission for 2023/24 is 31 May 2024.

Visitors from non-treaty countries cannot be included in the STBV Agreement. However there are special arrangements, that can be entered into with HMRC’s approval. Appendix 8 is an annual PAYE scheme which allows for a one-off payroll submission at the year-end. Applications for the 2023/24 Appendix 8 payroll and tax payments are due by 31 May 2024 following the end of the tax year.

So it’s essential for employers to navigate these reporting requirements. Understanding the nuances of each deadline ensures compliance with HMRC regulations.

For further information or advice in relation to any of the issues raised in this article, please contact Louise Fryer