QUESTION: I have been running a small business for the past six months and have a few employees working with me. PAYE is operated and reported to HMRC each time employees are paid their wages, however are there any other employer requirements that I should be aware of?
ANSWER: Starting a new business can be very daunting as you may be getting to grips with many requirements and obligations for the first time, for example employer obligations. While you operate PAYE on employee’s wages, along with this you should be providing employees with an itemised payslip and making sure you are complying with national minimum wage limits.
You will also want to familiarise yourself with what statutory payments employees are entitled to e.g. holiday pay, paternal leave, etc.
Employers are also required to set up a workplace pension and automatically enrol workers. Auto enrolment means that both the employer and the employee contribute to the employee’s pension scheme. While employees may decide to opt out it does not negate the employer’s initial obligation to comply.
Whilst the majority of employer reporting obligations occur under real time information (RTI), where the employer has not opted to tax benefits in kind via the payroll system, these must be reported to HMRC via P11D submissions.
This may give rise to a class 1A National Insurance Contribution (NIC) liability for the employer and income tax liability for the employee.
P11D & P11D(b) forms must be filed by July 6 following the end of the tax year in which the benefit was provided, i.e. July 6 2024 for the 2023/24 tax year. Late P11D forms attract penalties of £100 for every 50 employees per month.
The resulting class 1A NIC must be paid by July 19, with interest charged on any late payments as well as penalties.
Some of the more commonly reported expenses and benefits included on P11D forms are company cars and fuel, interest-free (or low interest) employee loans, private medical insurance, living accommodation, home broadband/phone costs, assets used by or transferred to employees and non-business expenses by the company (e.g. gym membership, personal expenses).
Although there are many items that need to be listed on the P11D form as expenses and benefits, there are common exempt business expenses that do not need to be included on your P11D forms, including business credit cards, business travel, entertainment expenses for business purposes, subscriptions and fees for professional bodies or journals, uniforms, and tools for work.
While employers have the option to payroll their benefits in kind, as an alternative to submitting P11Ds for each employee, they must register to payroll their benefits before the start of the tax year via their HMRC account and select which benefits they wish to payroll. Assuming this has not been done before April 6 2024, the first year you can do this for your employees is the 2025/26 tax year.
However, it’s worth noting beneficial loans and accommodation benefits cannot be payrolled.
I would recommend you seek the advice of your trusted business advisor to make sure that you are compliant with all your obligations and allow you to focus on your business’ success.
- KellyAnne Murtagh (k.murtagh@fpmaab.com) is senior tax manager at FPM Accountants Ltd (www.fpmaab.com). The advice in this column is specific to the facts surrounding the question posed. Neither the Irish News nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.
