7 March 2023
Global Mobility Tax
Impact: Low
Summary
A round up of recent UK employment tax, social security and immigration updates relevant to global mobility employers and our UK Vialto outlook for 2023.
Introduction of online route to submit amended Forms P11D and/or P11D(b)
Currently, any amendments to Forms P11D/Form P11D(b) can only be made on paper and posted to HMRC; from 6 April 2023 all amended returns must be filed online. HMRC is launching a new online submission link to allow employers to so file; HMRC will provide further details in the April Employer Bulletin.
This will particularly be of benefit for employers of globally mobile employees, enabling any errors as regards expat related benefits to be reported to HMRC in a more timely and efficient manner.
Salary advances
An increasing number of employers are allowing employees (whether directly or via a third party) to access some of their earned salary before their normal pay day. HMRC outlined its view on the proper reporting of these salary advances in Agent Update 102. Given the increased administrative burdens of this approach, HMRC announced they will amend secondary legislation to enable such salary advances to be reported on or before the employee’s contractual pay day. Further information, including plans to update guidance, will appear in future editions of HMRC’s Employer Bulletin.
Group Income Protection provided under salary sacrifice arrangements
Group Income Protection (GIP) policies are insurance policies designed to provide employees with a regular income if they cannot work because of long-term sickness or injury. How premiums and any subsequent payments made under the policy are treated from an employment tax perspective depends on a number of factors, particularly whether the premiums are deemed to be employer or employee funded.
Complexities arose following the introduction of the Optional Remuneration Arrangement (OpRA) rules. Whilst historically HMRC broadly accepted that premiums taxed as a benefit under the OpRA rules would count as employee contributions for the purposes of the broader income tax position, HMRC now considers that the fact the premiums may have been taxed under the OpRA rules has no impact on the treatment of any payments. This means that where an employer premium is taxable under the OpRA rules, the employee will suffer tax on both the premium and any subsequent payments made under the GIP.
Helpfully, HMRC has confirmed it will not seek to challenge the historic position and, where employers were relying on historic guidance, broadly they may continue to rely on this until 31 December 2023. Employers should document where reliance has been placed on previous guidance. They should also review any GIP arrangements to ensure any premiums are correctly being reported, where provided under a salary sacrifice arrangement, and ensure any relevant payments (or portion thereof) are processed via the payroll for income tax and National Insurance purposes.
2022/23 ERS return changes
HMRC has announced some minor changes to the content of the UK employment related securities returns for 2022/23 and has updated its guidance and technical notes. Full details are included in our news alerts here. The main change of interest for employers with globally mobile employees will be that provision of employee National Insurance numbers is mandatory and, if any award holder does not have a National Insurance number, employers will need to report both a reason (for instance that they are on an expat assignment and are exempt from National Insurance) and the person’s date of birth. As such, we recommend employers start data gathering a little earlier this year to be ready.
OTS report on hybrid and distance working
The Office of Tax Simplification has published its findings from the call for evidence on hybrid and distance working, both domestically within the UK and also internationally. Employers will welcome the large number of simplification suggestions in the report, intended to make it easier to manage new ways of working (remote, digital nomad, hybrid) compliantly, and also confirmation in the report on HMRC’s position on certain queries (for example allowing A1s for remote workers). We await to see how many of the recommendations, including those suggested by Vialto Partners, will be accepted and implemented.
UK compliance watch
We’ve seen an increase in HMRC activity on compliance letters, with recent letters being sent out regarding the following:
If you receive any HMRC compliance letters, do reach out to your Vialto contact who would be happy to advise.
Making Tax Digital
Unsurprisingly, Making Tax Digital for income tax (MTD) has been delayed by another two years until April 2026. MTD is an HMRC project to require taxpayers with income from property or self-employment to use software to keep the financial records on these matters, and to file regular tax reports on these items electronically. Users will need to keep digital records and file quarterly through MTD software and a year end declaration, rather than the traditional income tax return. This would affect landlords, e.g. expats who rent out their UK home while abroad.
From 6 April 2026, landlords with rental income (not profit) of more than £50,000 will fall into MTD. This will be extended to those with rental income above £30,000 from 6 April 2027. Self-employed individuals will also be brought in from April 2026. The delay gives more time to HMRC to consider the complexities of MTD.
To date, HMRC has not issued any guidance to developers of the software in respect of key considerations for globally mobile employees, such as residency and foreign income considerations. As April 2026 looms closer and more guidance is issued by HMRC, a key consideration for global mobile employers is the impact on tax support for expat employees: the MTD regime is very different from the current annual tax return filing.
This section is a quick look ahead to some of the developments we are expecting this year across tax, social security and immigration.
UK Spring Budget
After the many budget updates last autumn, the next UK spring budget is on 15th March. It may well be a quiet budget from a global mobility standpoint but we could see:
UK-Brazil Double Taxation Agreement (DTA)
We are awaiting ratification of the new UK-Brazil DTA and confirmation of when it will come into force. Currently the UK and Brazil only have limited agreements, so a comprehensive treaty covering residence and employment income for the first time is very welcome news!
Increase in Sponsor Licence Audits and Compliance
The Home Office has doubled the size of their sponsorship team to attempt to meet its goals of returning services and processing times to normal levels and preparing for increased volume in 2023. The team now has around 50 compliance officers in total who visit sponsors in order to conduct compliance visits. The visits will either be sector led, whereby they decide to target certain sectors of the market, or the visits will be intelligence led which means they may have pre-existing concerns about a specific business. Visits can be announced or unannounced, but they acknowledged that unannounced visits are currently very unusual. Desktop audits will increase, for example with automated checks with Companies House, and with HMRC’s records on salaries, to reduce bureaucracy, so sponsors can be audited without a physical site visit.
Launch of the UK ETA for visitors
The UK government is working towards an Electronic Travel Authorisation (ETA) for visa exempt visitors which will be introduced in 2023. The idea is to bring the UK in line with international partners such as the USA, Canada, Australia and New Zealand who have similar requirements for visitors.
Visa exempt visitors who previously could visit the UK with nothing more than their passport will be required to obtain an ETA for their visit. It is important to note that this is not the same as a visa. The ETA will be used to increase the government’s knowledge of the activities of visitors, as well as track and prevent visitors overstaying in the UK illegally.
Employers need to assess the impact of the ETA roll out on their business traveller population and then communications should be sent to alert their employees seeking to travel to the UK of the upcoming requirement for an ETA. The associated costs have not yet been confirmed; however, it is expected to be in the region of £20 to keep in line with similar programmes.
EU Covid/Teleworker update on social security rules
EU/EFTA/Switzerland are reviewing the social security rules for a subset of cross border workers who qualify as “Teleworkers”. We are currently in a transitional period until 30 June 2023 – allowing individuals to continue to pay social security as normal, even if their working pattern has changed to work for more time in their home location (e.g. above the 25% current multi-state threshold). Employers are eagerly awaiting more guidance on the position post 30 June 2023 for both multi-state workers and teleworkers, taking into consideration new ways of working. We understand the final proposal will be discussed at the EU Commission at the end of March. Given HMRC has followed the EU guidance up until now it will be interesting to see if (and how) any changes will apply to the UK going forward.
OECD looking at mobility issues
More welcome news – the OECD is looking at global mobility in 2023! The OECD is reviewing the difficulties global employers face when dealing with global mobility, particularly considering new ways of working. This is a very welcome development given employers are increasingly having to deal with remote workers, digital nomads, workcations and more, and grappling with how to apply current tax and treaty rules to these new types of workers.
HMRC Joint Expatriate Tax Forum updates
There are a number of outstanding queries that have been raised to HMRC over the last few years, which HMRC has been reviewing. Direction of travel seems to be that HMRC will shortly be publishing more guidance on the following topics:
On the social security side, HMRC has just published the long awaited results of customer research (including Vialto Partners’ views) on social security processes – namely suggestions for improving the application experience. We are hopeful that this will yield real progress at HMRC in digitalising the process end to end. Whilst the report reflects on the differing user experiences and their exposure to using HMRC’s current online process, HMRC highlighted 5 key areas where the user experience could be enhanced. The pick of these 5 areas were digitising certificates – moving away from hard copy certificates, providing a detailed status tracker for applications – removing the requirement to call HMRCs call centre and incorporating an ‘auto-fill’ feature within the online application forms in an attempt to reduce the number of questions. The report was the first step to identify how and what improvements could be made. Our social security team remains front and centre for all future discussions to assist HMRC and our clients get more from the current online process.
Recommended action
Do reach out to your Vialto Partners contact (or any of the individuals linked below) to discuss any of the above updates in further detail or to provide feedback and suggestions for useful content.
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