Are you ready for the 2016/17 expenses and benefits reporting season?
Our clients tell us it is becoming increasingly challenging to manage employment tax risk and reporting obligations. This year promises to test even the best prepared employers given the unprecedented scale and rate of changes to consider. Combined with a more active and vociferous HM Revenue & Customs (HMRC) approach to employment tax compliance and tax avoidance, it is more important than ever for in-house employment tax specialists to ensure that their systems and processes are robust. We work in collaboration with our clients to help them understand their payment and reporting obligations and help implement positive change.
Our approach to employment tax compliance is to provide an efficient, cost-effective service to help minimise the risk of irregularities that can be costly and time-consuming to rectify not to mention damaging to your relationship with HMRC. We add value by understanding your internal systems and analysing your data to provide suggestions for process improvements that can further mitigate the risk of non-compliance.
Employment tax compliance obligations are evolving and, to help you consider the best tailored solution, below we have listed the top 3 key issues for employers to consider this year.
1) Salary sacrifice
New rules take effect from 6 April 2017 introducing an income tax (tax) and National Insurance Contributions (NICs) charge for benefits provided via salary sacrifice. Our recent blog outlines the key points and sets out an approach to tackling the issues. A key consideration is the transitional rules which can retain the current advantages (employer / employee savings) and apply to arrangements entered into before 6 April 2017.
We are helping employers with these changes including planning future reward strategy, updating policies / procedures, communications and considering a benefit selection window to utilise the transitional rules.
2) Payrolling benefits
Following a successful trial, HMRC are introducing the opportunity for all employers to payroll benefits with effect from 6 April 2017. Our blog explores the potential implications and many of our clients are already conducting feasibility studies. Action is required now in order to make a final decision and notify HMRC before 6 April 2017 to be effective for 2017/18.
3) Controls environment
P11D dispensations were revoked at the start of 2016/17 and replaced by a new statutory exemption for business expenses. Inherent to the change was greater onus on employers to ensure that appropriate policies, processes and controls are in place to evidence the tax and NIC treatment applied. Our blog from April 2016 discusses this change and other important points to consider when reporting expenses and benefits in 2016/17 such as the new trivial benefits exemption.
How can we assist?
Form P11D reporting
Any firm can offer a form filling service but our approach adds value by seeking a deeper understanding of expenses and benefits. The risk is often not the items reported but those that are overlooked. A common error is failing to operate payroll withholding in respect of certain expenses but there is time to identify and correct this issue before tax year-end. Our employment tax specialists offer a service tailored to your specific requirements.
PAYE Settlement Agreement (PSA) assistance
It is common to report certain employee expenses and benefits on a PSA to ensure that no tax liability arises for the employee, for example a lunch to celebrate good performance. New trivial benefit rules introduced for 2015/16 offer the potential to reduce certain liabilities but careful application is required. We assist our clients with everything from obtaining HMRC agreements, reviewing tax sensitive ledger codes to ensure accurate tax accounting, to preparing / submitting computations.
Expense and benefit strategic review
The UK expense and benefits rules are inherently complex and there are many benefits to undertaking a review following significant recent changes in legislation. Often we are asked to assist when HMRC compliance activity is underway but a key issue is that subsequent disclosures are not considered unprompted which impact adversely on the penalty position. Where irregularities exist, better outcomes can be achieved through a self-initiated review and voluntary disclosure as it demonstrates a prudent approach to tax risk management.
Our employment tax team is on-hand to provide whatever level of assistance is required. Please let us know if you would like to discuss the matters highlighted.