HMRC: Globally Mobile Employee Exception for Mandatory Payrolling Benefits

• HMRC offers an exception to mandatory payrolling of benefits in kind for eligible globally mobile employees.
• From April 6, 2027, payrolling benefits in kind becomes mandatory for certain benefits, with most others following from April 6, 2028.
• The exception allows employers to report benefits for qualifying employees via P11D and P11D(b) forms.
• Eligibility requires UK tax residency and worldwide earnings subject to UK tax for employees working in multiple countries.
• Applications for exceptions cannot be backdated and must be accurate to avoid processing delays.

Compliance officers and legal counsel advising UK employers must be acutely aware of these provisions.

Her Majesty's Revenue and Customs (HMRC) has issued crucial guidance regarding exceptions to the upcoming mandatory payrolling of benefits in kind, a requirement set to take effect in phases, starting from April 6, 2027, for certain benefits. This new directive will compel employers to process these specific benefits through their payroll system, with most other benefits following from April 6, 2028. However, a specific provision allows UK employers to seek an exemption for certain globally mobile employees, enabling them to continue reporting these benefits through the traditional P11D and P11D(b) forms at the conclusion of the tax year.

This exception is designed to accommodate the unique complexities associated with international working arrangements. It provides a structured pathway for businesses to manage their tax obligations for employees who frequently cross borders for work, ensuring that while the reporting method differs, the underlying tax liabilities remain correctly accounted for. Employers must understand the precise criteria and procedures to leverage this exception effectively.

The HMRC guidance meticulously defines who qualifies as a "globally mobile employee" for the purpose of this exception. An employee is generally considered globally mobile if they work, or are anticipated to work, in the United Kingdom alongside at least one other country, or in a minimum of two countries other than the UK. Eligibility for an exception hinges on specific international working arrangements, requiring that the employee is both a UK tax resident and subject to UK tax on their worldwide earnings.

Conversely, certain scenarios typically do not meet the eligibility criteria. Employees who undertake only occasional business trips abroad, or those who regularly commute between the UK and another country, are usually not considered globally mobile for this specific exemption. It is critical for employers to accurately assess these conditions, as the exception solely alters the timing and method of reporting benefits, not the calculation or amount of Income Tax or National Insurance contributions due. Furthermore, an approved exception will encompass all benefits in kind provided to the employee; employers cannot selectively payroll some benefits while reporting others via P11D. This process also does not impact existing PAYE obligations, including those under EP Appendix arrangements.

Employers should initiate an application for an exception as soon as they identify an employee as, or likely to become, globally mobile. It is important to note that exceptions cannot be backdated. Until an exception officially commences on the specified start date provided in the application form, employers must continue to payroll the employee's benefits. If an application is submitted during a tax year and benefits are already being payrolled, the employer should cease payrolling those benefits from the exception's start date.

An approved exception remains valid for the remainder of the current tax year and subsequent years, unless an end date was initially provided on the form or the employee ceases to be eligible. To apply, employers will need to furnish each employee's National Insurance number, date of birth, full name, and the intended start and end dates of the exception. The online application system allows for the inclusion of an unlimited number of employees, either individually or via a spreadsheet upload, and permits users to save progress for up to 28 days. Upon successful submission, an email confirmation with an application reference will be issued, and employers can then treat the listed employees as exceptions from the designated start date.

Ending an exception also follows a specific protocol. Employers must apply to terminate an exception promptly upon realizing an employee no longer meets the eligibility criteria, unless an end date was previously supplied and the employee remained eligible throughout. An exception can only conclude at the end of a tax year, specifically on April 5. For the tax year encompassing the end date, benefits must be reported using P11D and P11D(b) forms. If benefits continue to be provided after this tax year, they must be payrolled starting from April 6 of the subsequent tax year. Accuracy in all application details is paramount, as errors can lead to delays or the rejection of the submission.

The forthcoming mandatory payrolling of benefits in kind from April 2027 represents a significant shift in how UK employers manage their tax reporting responsibilities. For businesses with a globally mobile workforce, understanding and correctly applying for the HMRC exception is not merely an administrative task but a critical component of international tax compliance. This guidance provides a vital mechanism for managing the complexities inherent in cross-border employment, ensuring that reporting obligations are met without disrupting the operational flow for employees working in multiple jurisdictions.

Compliance officers and legal counsel advising UK employers must be acutely aware of these provisions. The ability to report benefits for globally mobile employees via P11D forms, rather than through payroll, offers a necessary alternative for specific circumstances. Adhering to the precise application procedures, eligibility criteria, and timelines outlined by HMRC is essential to avoid non-compliance and potential penalties, especially as the April 2027 deadline approaches. This exception underscores HMRC's recognition of the unique challenges faced by employers with international workforces, providing a tailored solution within the broader framework of tax reporting.

Compliance officers and legal counsel advising UK employers with globally mobile employees must understand this HMRC guidance to correctly apply for exceptions to mandatory payrolling of benefits in kind, ensuring proper tax reporting via P11D forms and avoiding non-compliance, especially in light of the upcoming mandatory payrolling from April 2027.

Source: Original reporting via GOV.UK guidance.