Employer compliance – are you looking at the bigger picture?

Tax year-end is a good time to think about your employer compliance requirements and whether you’re getting full value from your data.

Tax year-end is a good time to think about your employer compliance requirements

It’s natural to focus on employer compliance at the tax year-end, to ensure that your 2021/22 withholding and reporting is complete and correct. However, it’s important to keep a wider perspective. Year-end is also a good time to think through how your processes, controls and governance might need to adapt, not just to deal with the immediate changes for 2022/23, but also to anticipate the demands they’ll need to meet in the years ahead and to challenge whether you get the best possible value from that data. Are there key insights to be gained that could better inform your business decisions? This article outlines some operational and strategic issues employers should consider as their attention turns to their 2021/22 year-end compliance. Companion articles in this edition of Tax Matters Digest look in more detail at the practicalities of getting ready for year-end employee share plan and employment tax reporting as well as getting your payroll ready for the year ahead.

Employer compliance – what’s the ask?

Employer compliance is high on HMRC’s agenda, as well as having significant political and media focus both in the UK and internationally. So there’s increased pressure to ‘get it right first time’, as well as establish and maintain tax control frameworks that are robust enough to ensure accurate reporting.

In the UK this manifests in regimes such as the Senior Accounting Officer rules, as well as HMRC’s Business Risk Reviews. Employer compliance may not always feel front and centre of these regimes, but it’s a fundamental part of overall compliance. If not appropriately managed, reputational and financial damage can occur.

The Environmental, Social and Governance (ESG) agenda is also increasingly important for corporate reporting, tax and legal risk frameworks, tax strategy and responsible business practices (including on reward). ESG considerations will play a large and evolving part in how businesses wish – and need – to operate and be seen to meet their obligations.

The big question on big data

Employer compliance is a source of opportunities as well as obligations. Big data – the use of modern processing power to analyse large data sets – has the potential to unlock valuable business insights.

For example, could your travel and subsistence expenses reveal patterns that help better manage costs? Do you have a true picture of the total amount a relocation costs? Are vouchers and incentives schemes being used consistently across the business? Spotting a trend of out of policy or inconsistent spending lets you investigate and take action. Whether that’s increasing awareness of policy, tightening compliance, implementing recharges or negotiating supplier discounts.

So do you get the most value from your employer compliance data – at year-end and in real time?

What should employers think about for now…?

While most businesses have processes and controls for mainstream year-end activities, such as completing their Forms P11D, other less common reporting requirements can fall under an employer’s radar.

This highlights the need to consider the provision of employee benefits and expenses in the round as part of year-end compliance and check that the costs have been fully accounted for. Points to consider include:

  • If you payroll benefits in kind, have the benefits been fully reported? Is there a shortfall or overpayment?;
  • Where employees left in the tax year has all reporting been actioned? Have you operated PAYE/NIC correctly where share-based awards continued to be held by ‘good leavers’?; and
  • Where there are gaps, how are these to be reported? Are benefits to be grossed-up for tax and NIC? Are items to be included in a PAYE Settlement Agreement?

Further points to consider are set out in our accompanying articles on year-end reporting considerations relating to the transition out of lock-down and employee share plan reporting.

Additionally, year-end is an opportunity to make sure that your payroll is set up for 2022/23, which you can read more on here.

Technology, such as KPMG’s Global Employment Tax Risk Diagnostics Tool, can help businesses track their risks and manage their compliance with confidence.

Technology can also help unlock business insights. Challenge yourself – are you using your employee data to make the best business decisions you could?

… and for the future?

Reviewing and strengthening your employment tax governance and compliance processes on a continuous basis can ensure your obligations are managed year on year.

Going forward, responding to ESG developments is key for all employers. From 1 April 2022, large businesses will need to consider whether they have applied any uncertain tax treatments in their PAYE returns, and in scope businesses will need to consider employment tax as they make sure their internal controls are ready for UK SOx over the next two to five years.

Getting your 2021/22 year-end compliance right is vital, but it’s only the beginning.

Employer compliance data sets and the value they can yield will only grow over time. Think about where you, and your competitors, could be with big data in the future. How will you get there? Now’s the time to plan.