Employment tax update - November 2023

01 November 2023

HMRC have now released their October Agent Update (Issue 113).

This bulletin follows the release of the October Agent Update (Issue 113). This month the content most relevant to employment taxes and reward activities includes:

Updated content for correcting mistakes with payroll (including National Insurance deductions)

  • Issue 113 sets out an overview of how employers should correct any current year and historic payroll mistakes.
  • At a high-level, if the mistake was made during or after the 2018/19 tax year, employers should first look to send a Full Payment Submission (FPS) with the corrected year-to-date figures; if the mistake was made in an earlier tax year, then an Earlier Year Update (EYU) should be submitted.
  • For full detail on how to correct payroll errors, the "fix problems with running payroll" guidance and the "correcting pay or deductions" guidance should be consulted. Both sets of guidance are due to be updated.

The Statutory Residence Test

  • HMRC are hosting a webinar on the Statutory Residence Test (SRT) which is due to take place in November 2023.
  • In advance of this webinar (and filing 2022/23 self-assessment tax returns) taxpayers can visit the residence status checker website which provides an indication of whether a person will be UK resident based on answers provided to specific SRT related questions.
  • Further information on the SRT is detailed in the residence, domicile and remittance basis manual.

Overlap Relief – preparing for the new tax year basis

  • Further to some of our previous Employment Tax Updates, the basis on which HMRC calculate taxable profits for sole traders and partnerships is changing to align with the tax year, rather than being based on the accounting year ending in a tax year. This change has been implemented for the current tax year (2023/24) onwards and means that Overlap Relief will have to be claimed in respect of any "overlap profits" that arose in the first period of self-assessment.
  • HMRC have launched an online form for submitting requests for details about Overlap Relief. To know what information is required when filling out this form, taxpayers should refer to the list included in the Overlap Relief section of Issue 113.
  • Taxpayers affected by the move to the new tax year basis should use the form to confirm the amount of Overlap Relief available to them ahead of submitting returns for the 2023/24 transitional year.
  • As a reminder, HMRC will only be able to confirm the amount Overlap Relief available if the relevant information for calculating the relief is recorded in the HMRC systems (i.e. it has been submitted in previous tax returns) or historic profit figures are shared with HMRC.
  • To help people understand the changes to the new tax year basis, HMRC have recorded a webinar on basis period reform. Watch the webinar.

Launch of the remittances toolkit

  • As mentioned in our October Employment Tax Update, HMRC have been working to produce a toolkit to assist agents and taxpayers with reporting remittance information on self-assessment tax returns. This toolkit is now live on the Government's website.
  • The toolkit sets out HMRC’s expectations in relation to compliance with the remittance basis legislation and is based on their view of how the tax law should be applied.
  • This toolkit has been added to the tax agent toolkit page which is a collection of existing HMRC toolkits on topics such as Capital Gains Tax and VAT.