Employer Bulletin: February 2022

HMRC have published their Employer Bulletin for February 2022. We have summarised the key content for you, with links to our detailed guidance on the topics covered. This bulletin covers essential information for 2021-22 end of year payroll, Benefit In Kind reporting and moving into the 2022-23 tax year.

End of year: 2021-22

Last Full Payment Submission or Employer Payment Summary of 2021-22

  • Every employer's last Full Payment Submission (FPS) or Employer Payment Summary (EPS) of 2021-22 needs to include an indicator that it is the final submission.
  • Some commercial payroll software will not let the user put the indicator on an FPS.
    • In these cases, employers should send their last FPS and then send an EPS with the indicator ticked.
    • Employers can also send an EPS with the indicator ticked if they forgot to put the indicator on their last FPS submission for the tax year.
  • Employers need to prepare to give their employees a P60 if they are in their employment on 5 April 2022.
    • The deadline is 31 May 2022.
  • If employers are not going to pay anyone again in 2021-22, they should send an EPS with the indicator ticked to show they did not pay anyone in the final pay period and it is the final submission.
    • Employers have until 19 April 2022 to do this but will get a message from the Generic Notification Service if they file it after 11 April 2022.

Reporting expenses and benefits for tax year ending 5 April 2022

Payrolling Benefits In Kind 2021-22

  • If employers registered online on or before 5 April 2021 and are using the payrolling Benefits In Kind process, they will  need to send:
    • A P11D for any benefits they have not payrolled.
    • A P11D(b) to tell HMRC about the employer Class 1A National Insurance Contributions (NICs) due on all benefits (including the payrolled ones).
  • Employers also need to give their employees a notification telling them which benefits were payrolled and the amount of the benefit.
  • Employers will need to pay any Class 1A NIC due on the benefits provided by 22 July 2022.

Reporting expenses and benefits 2021-22

  • If employers have paid any Benefits In Kind to employees, they must send P11Ds and P11D(b)s to HMRC no later than 6 July 2022 or they may get a penalty.
    • HMRC charges penalties on a monthly basis and issues penalty notices each quarter until employers file their return.
  • From 6 April 2022 employers will be able to start filing their 2021-22 P11D and P11D(b).

See Penalties: P11Ds and P11D: Reporting benefits and expenses

Payrolling Benefits in kind for 2022-23

  • If employers want 2021-22 to be their last year of using legacy paper P11D forms, they should register online before 5 April 2022 to payroll benefits for 2022-23 tax year.
  • Most benefits can be payrolled and there are a number of advantages. 
  • If employers are not in a position to move to payrolling, they can still move away from legacy paper P11D forms by submitting them online. 

See Payrolling of benefits

Decommissioning of HMRC’s Online End of Year Expenses and Benefits Service April 2022

  • The interactive PDF known as HMRC’s Online End of Year Expenses and Benefits service will no longer be available to use to submit P11D and P11D(b) returns for the 2021-22 tax year.
  • HMRC advise using the PAYE Online service.
    • This allows submissions for up to 500 employees.

See  P11D: Reporting benefits and expenses

Grossing up benefits and expenses through payroll

  • In February 2021, HMRC published guidance on how to gross up benefits and expenses through payroll.
  • This explains how to calculate the tax and National Insurance Contributions (NICs) due where employers choose to meet the tax and employees’ Class 1 NICs on behalf of employees.

Reimbursed expenses

  • Where employers reimburse taxable expenses to an employee who has met the initial cost themselves, the payment made is treated as earnings and is subject to tax and Class 1 NICs.
  • The PAYE and NICs should be deducted through the payroll and reported on the Full Payment Submission on a Real-Time Information return.
  • If employers intend to voluntarily meet the tax and employee’s NICs payable on the amount reimbursed, an additional payment can be made to the employee. This amount is also treated as earnings and is subject to tax and NICs.

Direct Provision of Expenses and Benefits

  • Where employers pay taxable expenses directly to the provider, for example to a hotel or through a booking agency, the position is different.
    • This is because the employee has been provided with a Benefit In Kind.
  • Unlike reimbursed expenses, it is the employee who is responsible for paying the tax on the value of the benefit provided.

Payrolled Benefits

  • If employers are intending to meet the tax and employee’s Class 1 NICs on benefits that have been payrolled, how this is calculated will depend on whether the benefit is liable to Class 1A or Class 1 NI.
    • To gross up a benefit correctly, it is first necessary to identify which class of National Insurance (NI) applies. 
  • Most benefits are liable to Class 1A NI and the amount of Class 1A NI due should be reported on form P11D(b).
  • There are some exceptions to this, such as train tickets which are treated as travel vouchers and are liable to Class 1 NI.

P11D Form

  • If the benefit is reported on a P11D form, employers can include an additional payment of earnings calculated on the grossed-up basis to cover the tax liability met by the employee.
  • This additional payment is treated as earnings and is subject to tax and Class 1 NI and should be reported on the Full Payment Submission on a Real-Time Information return.

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