Closing the 2021/22 UK tax year – Do employers have additional PAYE reporting requirements?

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published on 7 April 2022 | reading time approx. 3 minutes

 

With the tax year soon ending, invariably there are a number of year-end reporting requirements for companies to undertake to close off the tax year. Many may be familiar with these, the usual suspects being P11D(b), P60 and P9D.

 

 

However, employers should be mindful of additional reporting requirements that could arise as a result of;
 
1. benefits provided to employees
2. due to the issue of shares and share options to employees.
 
Rödl & Partner’s U.K. Personal Tax Team look into the compliance requirements that need to be considered for clients when such events occur.

 

 

PAYE Settlement Agreement

The purpose of a PSA is to enable an employer to settle the National Insurance Contributions and tax consequences on minor, irregular or impractical benefits and expense payments made to their employees, allowing the employer to avoid passing the tax charge on to employees.
 

What are irregular, minor or impractical items?

Below are some items that fall into these categories, although not an exhaustive list:

  • personal incidental expenses
  • qualifying relocation costs in excess of £8,000
  • non-allowable relocation costs
  • prizes, incentives and awards
  • benefits provided post-termination
  • staff entertaining
  • cost of assets transferred to employees
  • non-allowable subscriptions
  • non-allowable Christmas or annual functions
     

Advantages of a PSA

  • The employee effectively receives the benefit tax-free.
  • The employer will not have to report payments via monthly PAYE returns.
  • The employer will not have to report the benefits on the employees’ form P11Ds at the end of the
    tax year.
  • Instead, the employer can simply make one annual payment to cover the tax (and NIC) in respect of
    all the benefits included in the PSA.
      

Deadline

The deadline to apply for a PSA is 5 July following the end of the tax year.
Any Tax and NIC due must be paid by 22 October.
 

Employment Related Securities (ERS) return

Employment Relates Securities are shares and similar financial ‘securities’ held by employees and directors. Amongst other things, this can include shares, options and loan notes.
 
Employers will often use shares and share schemes as a way of incentivising and retaining employees by giving them a share in the business.
 
There are various methods of doing this and if planned diligently, there is scope to ensure effective tax planning for both the business and its employees.
 

Registration Requirements

All new tax-advantaged schemes should be registered by 6th July following the tax year it was established. These include the following schemes

  • Share Incentive Plans (SIPs)
  • “Savings Related” Share Option Scheme (SAYE)
  • Company Share Option Plans (CSOP)
  • Enterprise Management Incentives (EMI).

 

For ‘unapproved’ arrangements, you are only required to register the ‘scheme’ with HMRC once a
reportable event occurs for the first time, and this must be done by 6 July following the end of the
relevant tax year.
 

Reporting requirements

Once the scheme has been registered with HMRC the company is required to file an ERS return.
 
This is regardless of whether any reportable events have occurred within the year.
(A nil return will still be required to be submitted or an automatic penalty will be issued.)
 
Reportable events in relation to securities or options acquired by reason of employment include:

  • the acquisition of securities or of an option over securities (this will extend to acquisitions giving
    rise to employment income).
  • a chargeable event in relation to restricted securities.
  • a chargeable event in relation to convertible securities
  • an event which discharges a notional loan relating to securities
  • an event where securities are disposed of for more than market value.
  • the assignment or release of an option, or the receipt of a benefit in money or money's worth in
    connection with an option.
     

Deadline

The submission of the annual Employment Related Securities tax return must be filed online with HMRC by 6 July following the end of the tax year.

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