In the penultimate week of our Employer Tax Year-End Update series, we look at some of the key changes and issues affecting employers, as we emerge from the pandemic and head into a new tax year.
We begin with the impact of Covid-19 restrictions on employee travel, both domestically and internationally, which has been unprecedented and has resulted in displaced employees and, for many employers, the need to implement remote working arrangements almost overnight.
As restrictions are lifted and we are all now able to travel more freely, employees are returning to offices and workplaces and, for those employers who have a particularly mobile workforce, it will again be necessary to start thinking about the tax and NIC consequences of employee business travel.
Helpfully, the pandemic restrictions may have provided a ‘reset’ for employers. In particular, whilst business travel is starting to increase again, it may take some time before this returns to pre-pandemic levels, making this the perfect time to review procedures, update business travel policies and ensure that key staff understands the complex tax rules. Some of the key issues to consider include:
- Travel and subsistence
The tax treatment of travel and subsistence expenses is complex and is an area where we often see tax compliance failures. Particular issues can arise where employees have a varied working pattern, are working at a temporary workplace, or have more than one permanent workplace. Failure to be compliant in this area can result in costly tax and NIC charges for employers and employees as well as potential PAYE and/or P11D reporting failures.
- Tax residence
In 2020, HMRC introduced a temporary easement for non-UK resident employees stuck in the UK because of covid travel restrictions. The new guidance meant that these employees would not be taxed on earnings for duties performed in the UK after their planned departure date, provided they were taxed in their home country.
This easement will end on 5 April 2022 meaning that, for all non-UK resident employees, any days they spend working in the UK will count for tax purposes, even if they are prevented from leaving the UK as a result of Covid-19. More detail on this is expected in HMRC’s Employer Bulletin in April.
- Short term business visitors to the UK
In general, where an employee is working in the UK, PAYE should apply from the employee’s first day of working here. This can cause problems for employers who have regular short term business visitors (“STBVs”) coming to work in the UK, e.g. from overseas subsidiaries.
An STBV agreement (also known as an ‘Appendix 4’ agreement) can make life easier for employers, by relaxing the obligation to operate PAYE, if the relevant conditions are satisfied.
- Globally mobile employees
When sending employees from the UK on overseas secondments, employers may have to consider complex local tax and social security rules in the overseas jurisdiction e.g. will there be a payroll withholding obligation, are employees concluding contracts and potentially creating a permanent establishment overseas, are appropriate certificates of coverage in place for social security purposes? In addition to the potential tax and social security consequences, there are also wider legal, governance and risk issues to consider e.g. are employees appropriately insured, are the correct work permits and visas in place, could employees be contacted in the event of a global emergency?
If you have any questions about how the issues in this article may apply to your business, please do not hesitate to get in touch with the RET team at A&M.
How we can help?
At Alvarez & Marsal Taxand, our Reward and Employment Tax team has extensive experience in advising employers on their ongoing employment tax and NIC obligations.
We can offer a range of advice and services to assist employers in respect of P11D, PSA and ERS Annual Return compliance, as well as providing bespoke advice on all areas of employee reward and employment tax, including short term business visitor returns and special arrangements for tax equalised employees or overseas workers in the UK (App4-8 agreements). Please contact your usual A&M point of contact or Louise Jenkins, Tracey Norton, Clinton Knox, Linda Cameron or Monica Houston.