From April 2016, companies who wish to payroll employees’ benefits and expenses are able to make use of new PAYE legislation being introduced by HM Revenue and Customs. Organisations will have the option of using the online Payrolling Benefits in Kinds (PBIK) service instead of logging their information on a P11D.
Companies must register to use the new service, which comes into force on 6 April 2016. However, bear in mind that you won’t be able to use this service if you already use HMRC’s Basic PAYE Tools, as they don’t support payrolling.
If you don’t register the benefits and expenses you intend to payroll by 5 April 2016 then you’ll have to report them on a P11D but be aware that from the 2016 to 2017 tax year, HMRC will no longer accept informal reports of employee benefits.
For those employers using PBIK, the new statutory framework will allow them to deduct the tax due on benefits in kind through their payroll rather than through the P11D system. Some of the benefits employers will be able to initially payroll are:
- car fuel
- private medical insurance
- gym membership and similar subscriptions
If employers currently payroll car and fuel benefits, then they do not have to complete P46 (Car) forms as they are deducting the tax which is due on these benefits at source.
But you won’t be able to payroll;
- vouchers and credit cards
- living accommodation
- interest free and low interest (beneficial) loans
Payrolling benefits in kind should result in fewer under/over payments of tax, as well as fewer tax coding notices being issued. HMRC adds that all payroll benefits and expenses need to be included when employers report their payroll information in a Full Payment Submission (FPS).
The key to minimising employer risks in this area is careful planning, good record-keeping and factual information. A written agreement with HMRC to confirm tax treatment can provide assurance, comfort and of course, safety.
Finally, because employment taxes are undergoing changes both in legislation and regulations, it is strongly recommended that specialist advice is sought at the time of any action so that all matters can be fully considered.