The Check Employment Status for Tax (CEST) tool can be used to help ascertain if a worker should be classified as employed or self-employed for tax purposes in both the private and public sectors.

The service provides HMRC’s view as to whether IR35 legislation applies to a particular engagement and whether a worker should pay tax through PAYE. Additionally, the service will help to determine if off-payroll working in the public sector rules apply to a public sector engagement.

The software can be used to check the employment status of:

• a worker providing services;
• a person or organisation hiring a worker; or
• an agency placing a worker.

HMRC has said that it will stand by the result given unless a compliance check finds the information provided was not accurate. HMRC will not stand by the results of contrived arrangements, and one designed to create a particular outcome from the service. HMRC are clear that this would be treated as evidence of deliberate non-compliance and could result in higher penalties.

The service is anonymous, and the results are not stored online. However, the results can be printed and held for your own records. If any changes take place to the worker's role their status should be reassessed.

Where an employee with a company car is provided with fuel for their own private use by their employers, the default position is that the employee is required to pay the car fuel benefit charge. The charge is determined by reference to the CO2 rating of the car, applied to the car fuel benefit multiplier, currently £27,800.

The car fuel benefit charge is not applicable if the employee pays back their employer for any private fuel provided. This is known as ‘making good’. Private fuel includes the fuel used commuting to and from work. Employees should keep a log of private mileage for each tax year, which they can then apply to the published advisory fuel rates to repay the cost of fuel used for private travel.

The advisory fuel rates are intended to reflect actual average fuel costs and are updated quarterly.

If private fuel costs are reimbursed in this way, HMRC will accept there is no car fuel benefit charge, and the employee will save the income tax that would have been charged on any on any private car fuel provided. In most cases, it will be beneficial to repay your employer for private fuel rather than to pay the income tax charge, especially if private mileage is relatively low.

The car fuel benefit charge will still be payable if it cannot be demonstrated to HMRC that the driver of the car has paid for all fuel used for private journeys, this includes commuting to and from work. To ensure that this does not occur employees will need to keep a log of private mileage and ensure that they make good the cost of all fuel provided for private use.

For the tax year 2023-24, the deadline for reimbursing private fuel provided is 6th July 2024.

The deadline for submitting the 2023-24 forms P11D, P11D(b) and P9D is 6 July 2024. These forms can be submitted using commercial software or via HMRC’s PAYE online service. HMRC no longer accepts paper P11D and P11D(b) forms. Employees must also be provided with a copy of the information relating to them on these forms by the same date. P11D forms are used to provide information to HMRC on all Benefits in Kind (BiKs), including those under the Optional Remuneration Arrangements (OpRAs) unless the employer has registered to payroll benefits.

Payrolling benefits removes the requirement to complete a P11D for the selected benefits. However, a P11D(b) is still required for Class 1A National Insurance payments regardless of whether the benefits are being reported via P11D or payrolled. The deadline for paying Class 1A NICs is 22 July 2024 (or 19 July if paying by cheque).

Where no benefits were provided from 6 April 2023 to 5 April 2024 and a form P11D(b) or P11D(b) reminder is received, employers can either submit a 'nil' return or notify HMRC online that no return is required. Employers should ensure that they complete their P11Ds accurately, including all the details of cars and loans provided.

There are penalties of £100 per 50 employees for each month or part month a P11D(b) is late. There are also penalties and interest if for late payments of Class 1A NIC.

Any tax or National Insurance due for 2023-24 under a PAYE Settlement Agreement (PSA) needs to be paid electronically to clear into HMRC’s bank account by 22 October 2024 (19 October 2024 for payments by cheque). This does not need to be reported on a P11D form.

From April 2026, the government will mandate the reporting and paying of Income Tax and Class 1A National Insurance Contributions on benefits in kind via payroll software. This represents a significant change to the current system and should reduce the administrative requirements and simplify the tax system for both employers and employees.

This means that the 2025-26 tax year will be the last year that employers will be able to file P11Ds and P11D(b)s with HMRC in most cases. From April 2026, tax on employment benefits will be collected in real time and not through tax codes in arrears. Class 1A National Insurance contributions will also be collected in real time for each pay period rather than at the end of the year. HMRC has said that this change will remove the need for 4 million end of year returns to be submitted.

HMRC has said that they will engage with stakeholders to discuss their proposals to inform design and delivery decisions and draft legislation will be published later in the year as part of the usual tax legislation process. HMRC will also work with industry experts to produce guidance, which will be made available in advance of 2026.

Employers that take on a new employee need to work out which tax code and starter declaration to use in their payroll software. Incorrect tax codes can lead to a new employee paying more tax than is due.

Employers will require certain information from their new employee in order to ensure that the correct tax code and starter declaration information is entered on the payroll software. In most cases, all the necessary information can be found on the employees P45. It is important to remind new employees to bring this with them on their first day of work.

If the employee does not have a P45 the necessary information can be collected by asking the new employee to complete HMRC's online starter PAYE checklist. A paper version can also be completed if the new employee is unable to use the online version. This information must be held in the employers’ payroll records for the current year and the 3 following tax years. Once the information has been collated, HMRC’s online tool can be used to work out the employee’s tax code.

The starter checklist can be used by a new employee if:

• they have a student or postgraduate loan;
• their personal details are different to those shown on their P45;
• they do not have a P45; and
• they have been sent to work temporarily in the UK by their overseas employer.

Once the checklist has been completed, the new employee should email, post or give the completed list to their employer. There is no requirement to send the checklist to HMRC.

The rules for individuals providing services via an intermediary such as a personal service company (PSC) are complex. The rules apply if the worker who provides services to a client through their own intermediary would have been an employee if they were providing their services directly to that client.

The off-payroll working rules usually shift the responsibility for deciding whether the intermediaries’ legislation applies, known as IR35, from the intermediary itself to the client receiving the service. In most cases, the client will be responsible for determining the employment status of the worker. However, if a worker provides services to a small client outside the public sector, the worker’s intermediary is responsible for deciding the worker’s employment status and if the rules apply.

You may be affected by these rules if you are:

• a worker who provides their services through their own intermediary to a client;
• a client who receives services from a worker through their intermediary; or
• an agency or other supplier providing workers’ services through their intermediary.

There are different rules that apply to those working for a small business and those working for medium or large-sized businesses.

Private sector companies and voluntary sector organisations are considered medium or large-sized if they meet two or more of the following conditions:

• have an annual turnover of more than £10.2 million;
• have a balance sheet total of more than £5.1 million; 
• have more than 50 employees.

There are a number of scenarios that fall outside the off-payroll working rules. If you think you might be affected, we would be happy to help with looking at this issue.