United Kingdom: Closing the 2022/23 tax year – Additional PAYE Reporting Requirements for Employers

published on 3 April 2023 | reading time approx. 4 minutes

As the tax year is about to end, employers must complete several year-end reporting obligations to finalize the tax year. Some of these requirements may already be familiar to employers, such as P11D(b), P60, and P9D.

However, employers should also take note of additional reporting obligations that could arise due to:

Providing benefits to employees
Issuing shares and share options to employees

Rödl & Partner’s UK Personal Tax Team look into the compliance requirements that need to be considered for clients when such events occur. To comply with these obligations, employers must consider the following:

PAYE Settlement Agreement (PSA)

A PSA allows employers to settle National Insurance Contributions and tax consequences on minor, irregular, or impractical benefit and expense payments made to their employees. This agreement helps employers avoid passing the tax charge onto their employees.

What are irregular, minor or impractical items?

Irregular, minor impractical items that may be covered by a PSA include:
Personal incidental expenses
Qualifying relocation costs exceeding £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

The advantages of having a PSA include:

Employees can receive the benefit tax-free
Employers do not need to report payments via monthly PAYE returns
Employers do not need to report benefits on employees' P11Ds at the end of the tax year
Employers only need to make one annual payment to cover the tax (and NIC) for all benefits included in the PSA

Deadline

The deadline to apply for a PSA is the 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 Related Securities are shares and similar financial “securities” held by employees and directors, including shares, options, and loan notes. Employers often use shares and share schemes to incentivize and retain employees by giving them a share in the business. There are various methods of doing this, and diligent planning can ensure effective tax planning for both the business and its employees.

Registration Requirements

All new tax-advantaged schemes should be registered by 6 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 the 6 July following the end of the relevant tax year.

Reporting requirements

Once the scheme has been registered with HMRC, the company must file an ERS return, even if no 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:

Acquisition of securities or an option over securities
A chargeable event in relation to restricted securities
A chargeable event in relation to convertible securities
An event that 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