Employer Bulletin: April 2023

HMRC have published their Employer Bulletin for April 2023. We have summarised the key content for you, with links to our detailed guidance on the topics covered.

PAYE (Pay As You Earn)

Classification of company cars and vans for Benefit In Kind purposes

• HMRC are raising awareness of how vehicles should be classified for Benefit In Kind purposes following the 20 July 2020 Court of Appeal decision in respect of HMRC and Coca-Cola European Partners Great Britain Ltd which considered whether three different vehicles were vans or cars.
• The decision agreed with HMRC’s longstanding interpretation of the legislation, that:
  • For benefits purposes, the ‘construction’ of a vehicle is that of the final product when it is made available to the employee and the use to which a vehicle is put is not relevant.
  • The correct approach is to determine what a vehicle is first and foremost suitable for. Only if the predominant suitability of the vehicle is the conveyance of goods or burden will it be accepted as a van
  • A multi-purpose vehicle can have no primary suitability at all.
• This is of particular importance to employers that need to report company vehicles prior to the filing date of 6 July 2023.

See Company cars

Employer PAYE Direct Debits Time to Pay arrangements

• Employers wanting to set up a new Direct Debit for employer PAYE must do so early to ensure the payment is made on the 22nd of every month. For example, for May 2023, employers need to set up their Direct Debit by 10 May 2023, to make sure the money is collected on time.
• Agents cannot set up a Direct Debit on your behalf. You should log into your business tax account and, as long as you are enrolled in PAYE for employers, you will be able to do this yourself.

See Time to Pay agreement

Generic notifications when a Direct Debit is in place

• Employer PAYE Direct Debit payments are always collected shortly after the due date of the 22^nd of the month. As a result, you may be told by HMRC that your payment is late, this is not a penalty, but an advisory notice.
• There are some cases where this message is sent by HMRC even though payment was made on time. HMRC are looking at how to stop this from happening.

Time to Pay arrangement

If you are struggling to pay and have PAYE arrears, you may be able to set up a Time to Pay arrangement online.

• You must do this yourself via your business tax account, your agent cannot do it for you.
• If you do not meet the criteria for the online arrangement, you will need to call HMRC to discuss the options available.

The main criteria for the online arrangements are:

• The PAYE debt has to be less than £15,000.
• You must not have any other debts.
• The Time to Pay arrangement must be set up within 35 days from the date the liability was due.
• The debt must not include penalties or specified charges.
• All returns must have been submitted.

See Time to Pay agreement

Tax and National Insurance Contributions for termination payments

HMRC are highlighting the rules around Income Tax and National Insurance Contributions (NICs) treatment of termination payments, to help customers get their tax right. A number of changes happened to these rules over the past five years including:

From April 2018

• The introduction of Post-Employment Notice Pay (PENP) to make sure non-contractual Payments In Lieu of Notice (PILONs) are subject to tax and NICs, the same as contractual and customary payments.
  • The amount within the termination payment calculated as PENP is chargeable to Income Tax and NICs as general earnings and no longer benefits from the £30,000 threshold available in s.403 of ITEPA 2003.
• Foreign service relief is removed for termination payments to UK resident individuals if specific criteria are met. The relief still applies if the individual is not a UK resident during the year of termination, or is a seafarer with sufficient seafaring service.
• The exemption for injury does not apply to injury to feelings.

From April 2020

• Alignment of the rules for Income Tax and NICs by introducing a Class 1A NICs charge on qualifying termination payments above the £30,000 exempt limit.

From April 2021

• Changes to the calculation method for PENP where an employee’s pay period is defined in months but their contractual notice period or post-employment notice period is not a whole number of months.
• Non-resident individuals are charged to UK tax on PENP to the extent they would have worked during their notice period in the UK. Previously the PENP of non-UK resident employees from UK employment was not subject to UK tax as earnings.

Making sure the correct amount of tax is paid

To determine the correct tax treatment, you will need to identify what the payment is for.

A termination payment may consist of different types of payments such as:

• Compensation for loss of office.
• Payment in lieu of notice.
• Damages.
• Redundancy.
• Holiday pay.
• Retirement.
• Illness or injury of an employee.
• Payment for a restrictive covenant.

These payments may be taxable as earnings under other provisions of ITEPA 2003 or under s.401 ITEPA.

• Some payments such as those for an injury or illness or payment of legal fees in respect of the termination may be excepted from tax.
• If you have not paid the correct amount of tax and NICs corrections can be made through a Full Payment Submission (FPS).
  • Use the ‘Data item box’ (Class 1A year-to-date) for amendments to the Class 1A National Insurance contribution.

See Termination, redundancy and leaving payments

Student and postgraduate loans

Generic notification service messages to employers

• Employers should check the HMRC Online services for generic notification service messages which remind them about:
  • Starting or stopping student or postgraduate loan deductions.
  • Which plan type to use.
  • When not to take loan deductions for an employee who is subject to the Off-Payroll Working rules or only has an occupational pension rather than a salary.

Student and postgraduate loan thresholds and rates from 6 April 2023

• The 2023-24 thresholds and rates for student and postgraduate loans were published in Employer Bulletin: February 2023 

Employer PAYE charge queries

Every month HMRC creates a PAYE charge for all employers and pension providers.

• A small number of employers contact the employer helpline to advise HMRC of a discrepancy. Generally, HMRC advisors can explain and offer guidance on how to correct the problem.
• Cases that need closer examination are referred to HMRC’s charge resolution team who may contact you to discuss your account and will work with you to identify the issue and correct it.

The creation of duplicate employments for employees, where an extra employment record is created which is identical to an existing live or ceased employment, is still causing an issue. This can affect:

• The PAYE tax bill for tax, NICs and student loans, leading to unnecessary debt collection activity.
• Accuracy of employee tax codes, resulting in an incorrect deduction of Income Tax, PAYE, NICs, student loan, Universal Credit processes and tax credit renewals.

Avoiding duplicate employments

• Different payroll solutions provide employers with different capabilities and levels of control. You should check with your software provider about the functionality available to you.

Recommendations (where you are able) to avoid the creation of duplicate employment

When a new employee starts:

• Avoid the need for more updates to an employee’s name, date of birth or gender, by making sure the starter notification and first Full Payment Submission (FPS) include accurate personal details.
• Provide consistent information e.g. if the first FPS includes William Smith, make sure this is the case on future FPS’ rather than Bill or W Smith.
• Only include a start date and starter declaration on the first FPS, you should not show the start date on any later FPS’.
• You do not need to report changes to start dates to HMRC, they should only be recorded on your payroll system if required.

See PAYE: Starter checklist new employee 2023-24

Payroll ID changes

Each employee should have a unique payroll ID, often known as employee number or employee payroll number, this will most likely appear on their payslip.

• You should always use unique employee numbers or employee payroll numbers including where:
  • An employee leaves and is re-employed.
  • An employee working for you has more than one job whether on different payrolls or the same PAYE scheme.
• Where your software generates employee numbers that you cannot override, you should:
  • Enter the previous ID into the ‘Old’ field.
  • Enter the new ID into the ‘New’ field.
• You should:
  • Only set the payroll ID ‘change indicator’ when reporting payroll ID changes.
  • Complete both the ‘Old’ and ‘New’ fields with the most recently used payroll ID.
  • Set the payroll ID ‘change indicator’ when reporting your new payroll ID where you are unsure if the previous software included a payroll ID.

What to do when or after an employee leaves

• If you submit a FPS with a leaving date do not submit another one unless it is a correction such as to pay and deductions or a payment after leaving.
• Include the original date of leaving on payment after leaving or any corrections made after leaving.
• The payment after leaving indicator only needs to be set where you have already issued a P45 and have made another payment.
• Do not submit duplicate or identical FPS’ reporting a payment after leaving, unless you have received a rejection notification for the original submission.
• Changes to leaving dates do not need to be reported to HMRC, they should only be recorded on your payroll system if required

See PAYE Codes: Starters/leavers & 0T code

Occupational pension and irregular payment fields

• Only set the ‘occupational pension’ indicator or complete the ‘Annual amount of occupational pension’ if you are paying a pension, leave the field blank. Do not enter £0.00.
• Set the ‘Irregular payment pattern’ indicator for any employee who is paid infrequently.

See RTI: Real-Time Information for PAYE

Reporting expenses and benefits for the tax year ending 5 April 2023

Submitting form P11D and P11D(b)

From 6 April 2023:

• HMRC has changed legislation to mandate the submission of P11D and P11D(b) returns online.
• HMRC will no longer accept paper P11D and P11D(b) forms. This includes lists.
• For employers and agents who already submit P11D and P11D(b) returns online there is no change.
• Employers and agents who need to submit up to 500 P11D and P11D(b) returns can use the free HMRC PAYE online services, for anything more commercial software is required.
• For the 2022-23 reporting year, the submission deadline is 6 July 2023.

If you make a mistake and need to submit a form P11D and P11D(b) amendment

• From 6 April 2023 HMRC will no longer accept paper P11D or P11D(b) amendment forms and amended forms must be submitted electronically. No software changes are required, as the new electronic form is not part of the current PAYE online services.
• If an employer or agent submits a paper P11D or P11D(b) (original or amendment) after 6 April 2023:
  • The form will be rejected on the basis that it has not been submitted to HMRC in the prescribed manner.
  • The employer or agent will be notified of the rejection and directed to the correct process.

See P11D: Reporting benefits and expenses and P11Ds: Employers' checklist & top tips

Payrolling expenses and Benefits In Kind

For employers payrolling Benefits In Kind:

• Employers may still have a Class 1A NICs liability and will still need to submit a P11D(b) to tell HMRC how much employer Class 1A NICs is owed.
• Employers will also need to submit a P11D to show any benefits paid that were not payrolled.

For employers who have yet to join payrolling benefits

From 6 April 2023, employers can register to payroll benefits for the 2024-25 reporting year.

• Employers will no longer need to submit a P11D for each employee for whom they payroll benefits.

Informal payrolling

• If you already had an informal agreement with HMRC to payroll benefits for 2022-23 you must submit your P11Ds online and tell HMRC in advance that you are sending electronic P11Ds using the ‘PAYE — notification of payrolled benefits’ form.
• HMRC will no longer accept informal payrolling arrangements, you should have registered to payroll for 2023-24 by 5 April 2023.
  • If you have missed the deadline you must revert to online filing of your P11Ds for the 2023-24 reporting year.

See Payrolling of benefits

Paying Class 1A National Insurance Contributions due 22 July 2023

• Electronic payment for Class 1A NICs declared on your P11D(b) return for the tax year ended 5 April 2023 must clear into the HMRC account by 22 July 2023. You can use the ‘Pay now’ button to select one of the secure payment methods or find alternative ways to pay.
• Make sure your payment is correctly allocated by providing the correct payment reference, this is your 13-character accounts office reference followed by 2313 with no gaps between the characters.

PAYE electronic payment deadline falls on a weekend

In April 2023 the electronic payment deadline of the 22nd falls on a Saturday.

• To make sure your payment for April reaches HMRC on time, you need to have cleared funds in HMRC’s account by 21 April 2023, unless you pay by Faster Payments.
• If your payments are not made on time and, if your payment is late, you may be charged a penalty.

See Penalties: RTI (Real-Time Information) for PAYE

Update to ‘fix problems with payroll’ guidance and new process for overpayments of National Insurance Contributions

In the Employer Bulletin: February 2023, HMRC reminded employers that GOV.UK guidance had been updated to reflect the reduction in NICs by 1.25% from 6 November 2022, for the rest of 2022-23 tax year.

• For the 2023-24 tax year, employers should still correct overpaid NICs and submit a revised FPS as normal, to make the relevant corrections.
• From May 2023, HMRC will publish further information and updates to ‘fix problems with running payroll’ guidance
• Taxpayers will be able to ask for their 2022-23 NICs to be checked for an overpayment. They will get a written reply from HMRC explaining the outcome and a refund if one is due.

See National Insurance Rates and allowances

Tax updates and changes to guidance (employer and other general guidance)

The official rate of interest from 6 April 2023

• The official rate of interest used to calculate the Income Tax charge on the benefit of employment-related loans and the taxable benefit of some employment-related living accommodations increased from 2.00% to 2.25% on 6 April 2023.

See Official rate of interest

Changes to VAT penalties for late filing or payments

VAT periods starting on or after 1 January 2023

• New penalties apply for submitting or paying VAT late which replace the default surcharge.
  • The changes also apply to businesses that submit nil or repayment returns.
• There are also changes to VAT interest charges, with the introduction of interest on late VAT payments and changes to the way HMRC calculates repayments of VAT.
• To avoid being subject to penalties, businesses must submit and pay their VAT liabilities on time. If you are a quarterly filer, you may be subject to the new penalties from May 2023.

See Penalties (VAT)

Guidelines for Compliance: help with VAT apportionment of consideration

• The Guidelines for Compliance (number 2 in the series) on VAT apportionment of consideration was published 3 March 2023 alongside Revenue and Customs Brief 2 (2023): VAT and value shifting consultation update
• It is particularly relevant for all VAT-registered businesses that make bundled supplies at different liabilities of VAT.

See Mixed supplies: Single or Multiple supply?

Businesses misusing their till systems should come forward

• HMRC is writing to businesses suspected of evading tax by misusing their tills.
• Users of electronic sales suppression systems should come forward and disclose what they should have paid while misusing their tills.
• Where businesses fail to reply, HMRC can open an enquiry or, make an assessment of what it believes the business owes. This can include interest and penalties and where businesses give false information, HMRC may open a criminal investigation.

See Penalties: Electronic Sales Suppression

Off-Payroll Working rules (IR35):  engaging contractors

HMRC have recently updated their guidance on the rules, to make them clearer and easier to use.

• Some businesses may need to operate the Off-Payroll Working rules for the first time, either because they have not previously engaged contractors, or because they operate in the private and voluntary sectors and have recently met the size conditions.

This is particularly true if you have:

• Become a newly formed business.
• Been bought by another organisation.
• Changed size over the last few years.
• Started to engage contractors.

The rules have not changed for contractors working through their own limited company or Personal Service Company (PSC), or other intermediaries, who provide services to small client organisations in the private and voluntary sectors.

• Contractors in these circumstances are still responsible for considering and applying the Off-Payroll Working rules, commonly known as IR35 and may want to check that their client is a small organisation in the private or voluntary sectors.

Keeping records

Clients who engage contractors need to keep detailed records of their engagements, including:

• Names and addresses of both the contractor and their intermediary.
• Employment status determinations they make, including the reasons for the determinations.
• Fees paid.

See IR35: Off-Payroll Working

Preparing for the new tax year basis: Income Tax Self Assessment

The rules HMRC uses to calculate sole traders’ and partners’ profits for Income Tax in a Self Assessment return are changing from 2023-24.

• The change may affect the return that taxpayers must submit by 31 January 2025 and subsequent returns.
• This change is not affected by the delay to the introduction of Making Tax Digital for Income Tax Self Assessment.
• Only taxpayers with an accounting date other than 31 March or 5 April are affected.
• Under the new rules, from April 2024, businesses will be taxed on profits for the tax year and not, as now, the profits for the accounting year ending within a tax year.

Tax year 2023-24 transition year:

• The tax year 2023-24 is a ‘transition year’ in which self-employed businesses will move to the new way of calculating taxable profits for the tax year.
• Businesses need to declare total profits from the end of their last accounting date in the tax year 2022-23, up to 5 April 2024. Profits generated over a longer period will be taxable in the transition year.
• The transition year presents an opportunity (for businesses currently trading), regardless of accounting date, to use any overlap relief resulting from overlap profit, from when the business first started. By default, any remaining profit can be spread over five years.
• From 2023-24 some businesses might have to use provisional figures on their returns. The government will relax its guidance to give businesses the normal amendment time limits to submit their final figures if they have submitted provisional figures as part of their tax return.

Tax year 2024-25, and future years:

• For the tax year 2024 to 2025 and future years where accounting years are different from the tax year end, the taxable profits will be calculated, by apportioning the profits for the two accounting periods that straddle the tax year.

Accounting date changes

• For businesses changing accounting dates in the tax year 2021-22 HMRC can provide details of overlap relief figures or historic profit figures on request if these figures are recorded in HMRC systems.
• Taxpayers should ring the HMRC Self Assessment helpline and agents should ring the agent-dedicated line if they need this information to complete a 2021-22 tax return.
• Where a business’s accounting date is changed in the tax year 2022-23, the current change of accounting date rules will apply.
• Where a business decides to change its accounting date from the tax year 2023-24 these rules will not apply, and another change can be made, regardless of past changes.

Overlap relief requests

• HMRC is developing an online form for submitting overlap relief requests and will make sure these requests are dealt with separately from the general post which should be available during the summer of 2023.
• Overlap relief information can only be provided if these figures are recorded in HMRC systems, taken from information submitted by taxpayers as part of previous tax returns. If this information has not been submitted in tax returns, HMRC will not be able to provide it.

Overlap relief requests should include as much of the following information as possible:

• Taxpayer name.
• National Insurance number or Unique Taxpayer Reference.
• Name of business.
• Description of business.
• Whether this business is self-employment or part of a partnership.
• If the business is part of a partnership, the partnership’s Unique Taxpayer Reference.
• Date of commencement of the self-employment business.
• Date of commencement as a partner in a partnership.
• Most recent period of accounts or basis period the business used.

See Basis Period reform

Understanding your obligations on right to work and National Minimum Wage

• All employers in the UK have a responsibility to prevent illegal working and to comply with National Minimum Wage legislation.
• To help you understand these obligations Home Office Immigration Enforcement and HMRC are hosting a webinar on 16 May 2023.

See National living/minimum wage rates

Prepare for the Economic Crime Levy

The Economic Crime Levy was introduced in part 3 of the Finance Act 2022, as part of the government’s plan to develop a sustainable resourcing model for economic crime reform.

• Payments must be made by 30 September each year, with the first payments due 30 September 2023.

Economic Crime Levy online service

• An online service is being designed to allow those liable for the levy to register and submit annual returns. HMRC are seeking participants to test the service If you or someone you know are interested in helping HMRC test and build the service, contact:This email address is being protected from spambots. You need JavaScript enabled to view it..

See Economic Crime Levy

General information and customer support

• The annual ‘Tell ABAB’ survey is now available to complete. The survey provides crucial insight into the big issues faced by small businesses in the tax system and is your opportunity to provide the Administrative Burdens Advisory Board (ABAB) with insight on the tax system which they can then use to support you.
• The survey takes approximately 10 minutes to complete, and it will be open until 2 May 2023. Results from the survey will be published in the ‘Tell ABAB’ Report, which will be published on GOV.UK summer 2023.

Tax Administration Framework Review: simplifying and modernising HMRC’s Income Tax services through the tax administration framework

As announced at Spring Budget 2023, the government has published a discussion document exploring how HMRC can simplify and modernise HMRC’s Income Tax services, as part of its Tax Administration Framework review.

See Consultation: Tax administration framework

Anti-money laundering supervision: YouTube videos to help businesses

HMRC has launched four new anti-money laundering supervision video guides, to help customers get things right the first time when registering with HMRC for money laundering supervision.

• ‘How do I register for anti-money laundering supervision?’
• ‘When and how do I pay for anti-money laundering supervision?’
• ‘How to pay your annual supervision fee or opt out of anti-money laundering supervision’
• ‘What fees do I need to pay for anti-money laundering supervision?’

See our AML: Anti-Money Laundering Zone for more information.

Getting more information and sending feedback

• Make sure you are kept up to date with changes by signing up to receive email alerts.
• Send your feedback about this Employer Bulletin or ideas for articles in future bulletins, by email to This email address is being protected from spambots. You need JavaScript enabled to view it..

External link

Employer Bulletin: April 2023