Employment tax reporting 2022/23
What might employers focus on this year?
What might employers focus on this year?
As another tax year closes, it’s important that employers focus on their year-end employment tax compliance, which includes identifying taxable benefits and expenses, and reporting these so the correct income tax and NIC are paid. This article looks at some specific issues employers might consider in relation to 2022/23: the potential impact of hybrid working, potential over-reliance on the trivial benefits exemption, and some recent administrative announcements from HMRC. It also summarises key year-end tasks and deadlines.
What are the new challenges employers face from remote and hybrid working?
Flexible home-working is now a fundamental feature of many individuals’ working lives. But as the Office of Tax Simplification report on hybrid and remote working noted, the benefits code is still framed around traditional working patterns. And applying the current rules to modern ways of working can give rise to counterintuitive results – and unexpected income tax and NIC charges – for employers and employees.
Three particular areas we see challenging employers with remote and hybrid workforces are the provision of home-working equipment, home-working expenses, and home-to-work travel. As organisations with hybrid and remote workers start to consider their 2022/23 year-end employment tax reporting, and whether their systems and processes continue to ensure compliance, questions to consider might include:
- Are we providing home-working equipment tax and NIC free? Provided certain conditions are met, no liabilities should arise on employer-provided home-working equipment. However, this isn’t the case if the employer reimburses the employee for costs incurred in obtaining their own equipment. More generally, whether an employer provides a benefit to its employees directly, or reimburses employees for relevant costs, can affect whether income tax and NIC relief is available. This distinction, seemingly without a difference, catches some employers out (see our accompanying article for more detail on this issue);
- How are we dealing with leavers? Employers often allow leavers to retain home-working equipment they provided, as the costs of retrieving and storing it can often outweigh its value. However, this can give rise to a taxable benefit – do your leaver exit processes deal with this appropriately?;
- Can we show our employees are eligible for tax free home-working expenses? Employers can reimburse homeworkers’ reasonable additional household expenses tax free – either on a receipted basis or at a rate of £6 per week or other scale rate agreed with HMRC. But this requires a home-working arrangement between the employee and the employer, and not all expenses can be reimbursed tax free (broadband costs can be particularly hard to treat correctly). If you make home-working expense payments, can you demonstrate that all qualifying conditions are met?; and
- Are we getting travel expenses right? The rules on reimbursing travel costs between employees’ homes and permanent or temporary workplaces, and between different workplaces, were complex enough before widespread remote and hybrid working. But what happens when employees spend all, or a significant part, of their time working from home? When they do travel to the office, does tax relief apply in relation to the cost of that travel? And can you demonstrate more generally that you have a robust and comprehensive policy that employees and their line managers understand, and that your systems identify taxable travel expenses correctly?
Are you over-reliant on the trivial benefits exemption?
Many employers utilise the trivial benefits exemption as a ‘catch all’ for small benefits provided to employees that don’t fall within a specific exemption. Some are also utilising it specifically to provide additional support to employees to cope with the cost of living.
However, where a benefit is provided in recognition of particular services or is contractual then the trivial benefit exemption will not apply. Similarly so if the amount exceeds £50 (inclusive of VAT). Where relevant, could you demonstrate that the trivial benefits exemption applies, or continues to apply, to benefits you provide to your employees?
How you report might be changing too …
The February 2023 edition of HMRC’s Employer Bulletin reported that, from 6 April 2023, all P11D and P11D(b) reporting, and any subsequent amendments, must be online. You will need to use the free HMRC’s PAYE Online service or HMRC-recognised software such as KPMG’s P11D Solutions technology.
Also, HMRC will no longer accept new informal payrolling benefits arrangements, and employers who have existing informal arrangements must formalise these as soon as possible. Affected employers should move quickly to ensure they comply with HMRC’s new approach.
What are the key actions and deadlines?
Key actions and deadlines for 2022/23 employer year-end compliance are set out in the table below:
|To be reported on or before|
|Register with the Payrolling benefits and expenses online service for 2023/24 onwards||
5 April 2023
|Provide employee statements of payrolled benefits and expenses for 2022/23||
1 June 2023
|Agree a PSA (or change items covered by an existing PSA) for 2022/23||
5 July 2023
|Submit forms P11D and P11D(b) for 2022/23 and pay associated Class 1A NIC||
6 July 2023
|Report relevant post-termination benefits provided during 2022/23||
6 July 2023
|Register any new share plans (or other reportable arrangements) and submit any required employment-related securities returns (including nil returns) for 2022/23||
6 July 2023
|Report relevant benefits provided under an Employer-Financed Retirement Benefits Scheme during 2022/23||
7 July 2023
|Submit PSA computations for 2022/23 (though HMRC usually impose this as a contractual deadline it may be possible to agree a later submission date)||
31 July 2023
|Pay tax/Class 1B NIC liability for PSA 2022/23 by post||19 October 2023|
|Pay tax/Class 1B NIC liability for PSA 2022/23 electronically||22 October 2023
Is there anything else to think about?
In the changing landscape of tax compliance, tax authorities increasingly place emphasis on the integrity of company data and the processes, controls and governance that sit behind it.
Year-end is a good time to think through how your processes, controls and governance might need to be adapted for anticipated demands in the years ahead and to challenge whether you get the best possible value from that data. Many organisations are investing in technology and automation to improve confidence in the auditability of tax compliance processes.
From an employment taxes perspective, an increasing number of businesses are now moving away from the traditional labour-intensive and manual process of analysing large data spreadsheets to prepare their Forms P11D and PSA calculations.
Please reach out to this article’s authors, or your usual KPMG contact, if you would like to talk through how KPMG could support your year-end employment tax compliance.