Employers operating employee share schemes may now be receiving penalties from HMRC for failing to submit their employment related securities (ERS) end of year returns on time.

ERS schemes are used to provide employees with shares, options and other securities as rewards or incentives. Employers must submit an annual ERS return for every scheme registered with HMRC, including a nil return where there have been no reportable events. The deadline for 2025-26 returns was 6 July 2026.

A £100 late filing penalty is automatically issued where a return was not submitted by the deadline. If the return remains outstanding three months after the deadline, a further £300 penalty applies. Another £300 penalty applies if it is still outstanding six months after the deadline. HMRC may also charge daily penalties from nine months after the original deadline.

Employers who have received a penalty must still submit the outstanding annual return or nil return. This also applies where a penalty is being appealed. If a scheme has ceased, the employer must enter the final event date and submit the return for the tax year in which the scheme ended.

UK employers with employees who normally work overseas may have PAYE and National Insurance obligations when those employees come to the UK to carry out their duties in the UK on a short-term basis.

Employers should consider the position whenever an overseas employee visits the UK to work. The fact that the employee remains employed and paid by an overseas company does not, by itself, mean that there is no UK PAYE obligation. In some circumstances, the UK company hosting the employee may be responsible for operating PAYE.

There are arrangements that can help employers with the normal PAYE requirements for qualifying short-term business visitors. For example, an EP Appendix 4 arrangement may allow a UK host employer not to operate PAYE where the relevant conditions are met, including where a double taxation agreement applies and no UK Income Tax liability ultimately arises. National Insurance needs to be considered separately, as an Appendix 4 arrangement does not cover NICs.

Where PAYE is required but it is impractical to operate it in the normal way, an EP Appendix 8 arrangement may be available for certain short-term business visitors. This allows the employer to report and pay the relevant tax after the end of the tax year, subject to the conditions of the arrangement.

If you have overseas staff working in the UK, we can help you make sure your payroll processes are correct. 

Employers providing uniforms or protective clothing to employees need to understand the tax and National Insurance rules that apply. The treatment depends on whether the clothing is required for the employee’s job, is a uniform worn only at work, or is simply additional clothing provided by the employer.

Most uniforms and protective clothing are exempt from tax and National Insurance, provided they meet the relevant conditions. This can include the cost of buying, cleaning, repairing or replacing a recognisable uniform or protective clothing required for the employee’s job. Where an exemption applies, the benefit does not need to be reported to HMRC.

However, employers may need to report clothing provided to employees on form P11D where the exemption does not apply. This can include the cost of buying clothing, lending it to employees, or paying for cleaning and repairs.

Other clothing provided by an employer is generally treated differently. If clothing is not a uniform or protective clothing, the cost is normally a taxable benefit. The employer may need to report the benefit, pay Class 1A National Insurance and the employee may have tax to pay.

Employers should review the tax treatment whenever clothing is provided to employees, particularly where the clothing is not clearly a uniform or protective item. Keeping clear records of the clothing provided, its purpose and how it is used will help employers determine whether an exemption applies and support the treatment adopted if HMRC asks for evidence. 

Employers providing loans to employees or directors need to ensure they correctly calculate any taxable benefit using HMRC’s official rate of interest. Where a loan is provided at no interest or at a rate below the official rate, a taxable benefit may arise. These types of loans are referred to as beneficial loans.

A beneficial loan therefore occurs when the interest paid by the employee or director is less than the interest that would have been payable using HMRC’s official rate of interest. The taxable benefit is generally calculated on the difference between the interest due at the official rate and the amount of interest actually paid.

The official rate of interest is set by HMRC and is used to calculate the taxable benefit for each tax year. Employers must use the correct rate when reporting benefits through payroll or on form P11D. The rate may change over time, so employers should check the applicable rate for the relevant tax year. For the 2026-27 tax year, HMRC’s official rate of interest is 3.75%. Employers should use the correct rate for the relevant tax year when calculating the taxable benefit on beneficial loans.

For example, if an employee receives an interest-free loan, the employer must calculate the interest that would have been charged using the official rate and report this amount as a taxable benefit, unless an exemption applies.

Certain loans may be exempt from the beneficial loan rules, including some small loans where the total outstanding balance does not exceed £10,000 throughout the tax year.

Employers should review any loans provided to employees or directors regularly to ensure the correct calculations are made and benefits are reported accurately.

A Full Payment Submission (FPS) is a payroll report that employers must send to HMRC every time they pay employees. Using payroll software, employers use an FPS to report payments made, deductions from pay and National Insurance information, ensuring HMRC has an up-to-date record of their payroll obligations.

This submission should include all everyone you pay, even if their weekly earnings are less than £96. You must send the FPS on or before your employees' payday, regardless of whether you pay HMRC monthly or quarterly. When reporting, always enter the usual payday, even if you pay employees earlier, for instance, due to a Bank Holiday.

You can send an FPS before the regular payday, for example, if your payroll staff are on holiday, but avoid reporting too early. This is because changes, such as an employee leaving or a tax code change, may require a corrected FPS. Reports for the new tax year cannot be sent before March.

Your FPS must contain essential information, including employer details, employee information, pay and deductions, and National Insurance contributions. After submission, you can view how much tax and National Insurance you owe in your HMRC online account from the 10th of the next tax month. Claim any reductions, like statutory pay, by sending an Employer Payment Summary (EPS) by the 19th. The balance is due to HMRC by the 22nd, or 19th if paying by post. Correct any errors by sending a corrected FPS as soon as possible.

You should always send your FPS on or before payday and ensure all required information is included. It is also important to correct any errors as soon as possible. You need to report extra information when there are new employees, an employee leaves, you are filing the last report of the tax year or when you start paying someone a workplace pension.