Have you considered your 2024 HMRC employee reporting requirements?

Written by Jack Antony, Tax Assistant.

Have you considered your 2024 HMRC employee reporting requirements? Deadline 6 July.

Employee reporting requirements are a crucial aspect of ensuring compliance with tax regulations and maintaining transparency in financial transactions within organisations. Among the key obligations for employers are the completion and submission of forms P11D and reporting of Employment Related Securities (ERS). 

What are Employment Related Securities (“ERS”) and what do I need to know?

A company must disclose to HMRC all “reportable events” or transactions that occurred during the year to 5 April 2024 by 6 July 2024, otherwise late filing penalties will apply.  

Reportable events include most share issues or transfers and any share options activity (including EMI) involving employees or officers of the company that occurred by reason of their employment.  If employees or officers of a company have received shares or share options during the year the transactions will need to be reported unless the transaction is covered by a specific exemption. 

The more common types of reportable events that need to be included on an ERS Return are as follows: 

• One-off acquisition of shares, or interests in shares, by an employee or officer of the company, even if the acquisition took place at market value. 
• Grants of share options to an employee or officer of the company. 
• Exercise of share options by an employee or officer of the company. 
• The assignment or release of share options held by an employee or officer of the company. 
• A chargeable event in relation to restricted securities, i.e. the lifting of restrictions.  

When a company has an active ERS scheme with HMRC, even if there are no reportable events, they are required to submit an annual ERS return by the 6 July deadline every year until cessation. In the event of no reportable events, a nil return must be submitted.  

Failure to meet the ERS reporting requirement and deadline will result in an automatic £100 penalty being issued by HMRC. The penalties increase by an additional £300 when the return is 3 months late, then an additional £10 per day when the return is more than 9 months late. Material inaccuracy can also cause an additional penalty of up to £5,000. 

What are P11Ds and what do I need to know?

When an employer provides payments to an employee in a form other than cash, this will normally give rise to a benefit in kind. Broadly speaking, benefits in kind are calculated at their ‘cash-equivalent value’ which is defined as the ‘expense incurred in or in connection with the provision of the benefit’, inclusive of VAT 

P11Ds are forms employers must submit to HMRC annually, reporting the value of the reportable benefits an employee or director has received, provided they are not covered by PAYE settlement agreements or a payroll arrangement agreed with HMRC. Common benefits that require reporting include: 

• A company car 
• Private health insurance 
• Assets provided to an employee 
• Non-business travel expenses 

Employees must receive a copy of the P11D by the 6 July following the end of the tax year, which is also the filing deadline. 

An ‘incorrect’ or ‘late’ P11D will result in automatic penalties and interest will be charged on the late payment of the liability. A P11D(b) is submitted by the employer to show the Class 1A NIC due on the benefits in kind provided to employees and failure to submit on time will cause a £100 penalty per 50 employees every full month the submission is late. After 1 month the penalty is given an additional 5%, 10% after 6 months, and 15% after 12 months so to avoid these it is important they are submitted on time and correctly. 

What is a PAYE Settlement Agreement (“PSA”) and what do I need to know?

A PSA is an arrangement that allows employers to pay the income tax and NIC rather than report these on a P11D. To register for this the employer must put a PSA contract in place with HMRC by the 6 July following the end of the tax year the benefits were provided. The employer is expected to provide a computation of the tax and NIC due and the liability that arose is paid to HMRC by the 19 October (22 October if electronic) following the tax year. 

To record a benefit on the PSA, the benefit must fall into the categories of ‘minor’, ‘irregular’, or ‘impracticable’. In general terms, this would mean a benefit with no predetermined limit to the value such as gifts, or irregularly paid benefits and cases where it would be difficult to allocate a value to each employee.  

Examples of benefits that maybe covered by a PSA are: 

• Incentive awards, for example for long-service 
• Telephone bills 
• Small gifts and vouchers 
• Relocation expenses over the statutory exemption  
• Provision to employees of welfare counselling advice 
• Provision of special equipment to employees with a disability 

Employers can’t include items such as cash payments or large, regular benefits such as company cars or medical insurance which must be reported on a P11D or through payroll arrangements. 

How can we help?

Kreston Reeves offers a wide range of services that allow you to review your existing arrangements, or design a new range of benefits, that are tailored cost-effectively. We have a specialist share scheme team that can work with you to implement a share scheme that meets your goals while ensuring tax efficiency for both the company and the employee. 

We understand that topics such as share schemes and benefits can be complex for employers and employees to understand along with why this can improve their work environment. We offer summary information for employees and can come along to meetings if requested to do so.

If you would like further information, please contact us using the form below.