Tips to tackle key dates for employer compliance reporting

As an employer, you will be aware that where you provide benefits to employees or meet certain expenses, then you will need to make annual returns to HM Revenue & Customs (HMRC) together with any associated tax and National Insurance (NI) payments.

With the lifting of coronavirus restrictions and the end of the Covid-19 related tax exemptions, the resumption of gender pay gap reporting and a return to business as usual by HMRC, employers will have more than usual to consider in their employee benefits report for 2021/22.

Completing the returns required can be complex but there are a range of tools employers can use to provide comfort that they are getting things right.

P11Ds

Employers must report any non-payrolled taxable expenses and benefits-in-kind (BIKs) provided to employees during 2021/22 using forms P11D. Employers will need to complete a form P11D for each employee provided with non-payrolled BIKs. In addition, you will need to file the employer return P11D(b) if you have a Class 1A National Insurance Contribution liability or where you payroll expenses and benefits.

Key Deadlines

• Submission of P11D/P11D(b) to HMRC – 6 July 2022
• Payment of employer Class 1A NIC – 19 July 2022 (extended to 22nd if payment is by electronic means)

BDO offers market leading P11D software which is used by most of the top 50 accountancy firms in the UK. If you prepare the forms P11D/P11D(b) inhouse then please check out our P11D software solution available from the BDO store here. Alternatively, if you would prefer to outsource your P11D compliance cycle, BDO’s specialist employment tax team are available to provide a bespoke and expert service.

Covid-19 and P11Ds – what do employers need to know now?

HMRC agreed certain relaxations to exemptions from P11D reporting which will end on 5 April 2022. As a summary:

• Home working costs: employees may claim tax relief for un-receipted allowance of up to £6 per week (£26 per month) either via reimbursed expenses or directly from where certain tests are met.
• Home-working equipment: there is an exemption for the reimbursement of employee’s costs or buying equipment obtained for the sole purpose of enabling the employee to work from home as a result of Covid-19.
• Mobile phone costs: employees who did not have access to their work phone, may have used their personal mobile phones more frequently during 2021/22. Claims for the costs of itemised business calls, texts and data only (and this is evidenced), are not taxable. The normal exemption for the provision of a mobile phone by the employer is not affected.
• Employer-provided Covid-19 testing for employees: The costs of antigen tests are not treated as a benefit subject to tax and NIC. Similarly, the cost of PPE provided to employees relating to their work is non-taxable and need not be reported on P11Ds.

It is important for employers to ensure that any policies in place which have been designed to utilise these temporary tax exemptions have been revised in time for the new tax year commencing 6 April 2022.

PAYE Settlement Agreement (PSA)

Sometimes as an employer you may decide that you would prefer to meet the employee’s tax liability arising on BIKs rather than have staff pay the tax due through the payroll or via the P11D process. In this case you will need a PSA.

A PSA is an agreement entered into between an employer and HMRC. It is used 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. If 2021/is the first tax year for which you wish to enter into a PSA with HMRC, you will need to have the PSA in place by 5 July 2022.

Key Deadlines

• Application to HMRC for PSA (usually using form P626 which includes the items needed for the application) – 5 July 2022
• Payment of income tax and Class 1B NIC – 19 October 2022 (extended to 22nd if payment is by electronic means)

Taking action

The Covid-related relaxations are ending and HMRC’s approach to filing deadlines is back to normal so it is as important as ever to ensure that you can tax benefits and expenses correctly and make the right returns at the right time. Please contact us for more information.

If you have any queries about your year-end reporting obligations, or need to clarify which of them apply to your organisation, you can use our Employers’ Year End summary as a useful guide.