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Employment taxes spring clean

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A number of recent and forthcoming changes will give employers much to think about now and in coming months, including: a new reporting regime for intermediaries; a new deadline for reimbursement of PAYE for notional payments; electronic filing of annual share scheme returns; new share scheme sourcing rules affecting internationally mobile employees; and changes regarding private use contributions towards company cars and vans.

Following numerous consultations and proposed changes in legislation, we reflect on the most significant of these, together with a summary of key dates for employees and employers in 2015/16.

Key points

Intermediaries quarterly reporting

The new reporting regime for intermediaries commenced 6 April 2015 (The Income Tax (PAYE) (Amendment No. 2) Regulations, SI 2015/171), with the first return for the first quarter due by 6 August 2015. Intermediaries are required to report where they supply more than one worker (who personally provides services) to a client, and make payment(s) in respect of or connected with a worker’s services, which:

  • should be included in the intermediary’s RTI reporting but are not; or
  • need not be included in the intermediary’s RTI reporting because the worker is not employed or deemed employed by the intermediary under reg 10 of the PAYE regulations and ITEPA 2003 s 44.

Note that any person with a contract between a worker and a client can be an intermediary. However, when say, a business sends one of its own employees on secondment to a client, this will not need to be reported. In contrast, if the secondee is engaged as a contractor through a personal service company, that worker will need to be reported by the engager.

Where a worker should be included in a return, the requisite personal data must always be reported but details of payments to that worker can be excluded if they are already included in someone else’s RTI return (assuming this can be determined).

Reimbursement of PAYE on notional payments

For 2014/15 onwards, the deadline for employees to reimburse their employers for the PAYE (in excess of the amount the employer could have deducted from pay) due on ‘notional payments’, such as employment related securities, is 90 days after the tax year end, i.e. 4 July 2015 for the year just passed (under ITEPA 2003 s 222, as amended by FA 2014 s 19). Previously, the deadline was 90 days from the date of the notional payment.

Electronic filing of annual share scheme returns

In 2014/15, annual returns can only be made online (FA 2014 Sch 8). Employers must register with HMRC via HMRC online services and allow seven days for the registration to take effect before they can file returns. Filing must be complete by the normal 6 July deadline. Failure to register an existing tax advantaged approved scheme by 6 July 2015 may result in the loss of all tax advantages (unless the scheme was recently set up and no awards have yet been made). As now, a return for non-tax advantaged schemes is only required where there have been awards or chargeable events.

The various spreadsheet templates can be populated in-year as and when share scheme events occur. Illustrative scenarios have been published by HMRC.

New share scheme sourcing rules

Share vestings and option exercises from 6 April 2015, which are subject to the special tax charges on income from employment-related securities are subject to new sourcing rules (FA 2014 Sch 9). There is no grandfathering back to the pre-6 April rules.

For PAYE purposes, gains must be apportioned by reference to the time worked in the UK, normally on a days worked basis from grant to vest/exercise. For NIC purposes, apportionment must be based on the number of days the individual concerned was NIC insured in the UK between grant and vest/exercise.

The rules are complex and there will be both winners and losers. For example, consider a UK inbound assignee granted options before arriving in the UK. Before 6 April 2015, no NIC liability arose if the individual was not subject to UK NIC at the time of grant. But after 5 April 2015 a proportion of the gain would be subject to class 1 NIC based on calendar days insured in the UK over the period from grant to vest.

However, individuals who were UK resident at grant or award and non-resident at vest or exercise may benefit, if they live or work in a country with which the UK has no double tax treaty. The new rules will limit the UK tax charge by reference to the days worked in the UK in (normally) the award to vest period. Under the pre-6 April 2015 rules the whole gain would be chargeable.

Trivial benefits

Employers should note that the introduction of a new £50 (limited to a total of £300 per annum for close company officers) tax exemption for trivial benefits has been postponed. Therefore employers will have to continue to apply the existing concessionary practice for the time being, with the uncertainty and inconsistency that can entail. Where certainty on the maximum value of a trivial benefit is required, the position should be agreed separately with HMRC.

Medical interventions

A £500 capped tax exemption is in force from 1 January 2015 (ITEPA 2003 s 320C, inserted by FA 2014 s 12), which aligns closely with DWP’s ‘fit to work’ guidance to reintroduce employees on long term sick leave back into the workplace. The exemption enables employers to cover the cost of medical treatment recommended by healthcare professionals (including in house occupational health services) for employees after a long-term sick leave.

Private use contributions towards company cars and vans: Following case law and amended legislation (ITEPA 2003 ss 144, 158, as amended by FA 2014 s 25(1)), employers and employees should note that for 2014/15 onwards any contribution by employees towards the private use of company cars or vans, strictly needs to have been made on or before the tax year end.

A pragmatic administrative easement would allow contributions to be made shortly following the year end, perhaps up until 6 July to coincide with form P11D reporting; but, for the time being at least, HMRC has rejected this suggestion.


It clearly isn’t ‘business as usual’ in the reporting of pay, benefits and expenses and the payment of any associated tax. Employers will want to review their current arrangements to check whether any of the developments above apply to them and take appropriate action.