This bulletin follows the release of the August Agent Update (Issue 111). This month the content most relevant to employment taxes and reward activities includes:
Correcting payroll mistakes for an earlier tax year
- If an employer reported the wrong pay or deductions:
- in the 2020/21 tax year (or later), the error should be corrected by submitting a new Full Payment Submission (FPS) with the correct year to date figures;
- in the 2019/20 tax year, the error should be corrected by either submitting an Earlier Year Update (EYU) or an FPS with the correct year to date figures (software permitting); and
- in the 2017/18 or 2018/19 tax years, the error should be corrected by submitting an EYU showing the difference between what was originally reported and the correct figure.
- If an employer used the wrong National Insurance (NI) category letter:
- in the 2020/21 tax year (or later), the employer should submit a new FPS with the correct category letter and the correct year to date NI figures;
- in the 2019/20 tax year, the error should be corrected by either submitting an Earlier Year Update or an FPS; and
- in the 2017/18 or 2018/19 tax years, the error should be corrected by submitting an EYU with negative amounts in all the NI year to date fields for the incorrect category letter (reducing the NI amounts to zero). The employee should then enter the correct year to date NI figures under the correct category letter.
- If a mistake causes an overpayment of NI, but the employer still owes the employee a refund (e.g. because the employee has left their employment), then the employer will need to write to HMRC setting out details of the overpaid NI. See the correcting payroll mistakes section in HMRC’s Agent Update for more information.
Convention on social security coordination signed with Iceland, Liechtenstein and Norway
- On 30 June 2023, the UK and the European Economic Area (EEA) and European Free Trade Association (EFTA) states of Iceland, Liechtenstein and Norway signed a Convention on Social Security Coordination.
- The agreement ensures that employees, their employers and self-employed individuals are only liable to pay social security contributions in one state at a time.
- It also ensures access to an uprated UK state pension and to reciprocal healthcare arrangements.
- It is estimated that the agreement will be brought into force at the end of this year, applying first to the UK, Iceland and Lichtenstein, with it later being extended to cover Norway in 2024.
Online form for overlap relief
- HMRC is launching an online form to submit requests for information on the overlap relief available for taxpayers.
- This online form will be available from 11 September 2023 (which is an amended date from the previously announced 29 August).
- Further HMRC guidance will be published on overlap relief and the changes to the rules for the new tax year basis, but for now existing guidance on changes to reporting income from self-employment and partnerships can be found on GOV.UK.
- Affected taxpayers with an accounting date other than 31 March or 5 April should use the overlap relief service ahead of submitting returns for the 2023/24 transitional tax year.