Payroll considerations: changes to Benefits in kind – what to watch out for

Chris Campbell

Chris Campbell

Tax Senior Manager

Reporting requirements

On 6 April 2016, we saw the demise of the dispensation tool which exempt employers from reporting certain reimbursed expenses paid to employees. Instead, HMRC introduced exemptions to simplify the system, meaning certain qualifying business expenses need not be reported such as travel and subsistence payments for qualifying business journeys. However, employers should beware that while there is no reporting requirement, the necessity to keep accurate records of reimbursed expenses remains, as this is an area likely to be closely reviewed by HMRC Inspectors during any Compliance Check. 

Payrolling of benefits

Payrolling benefits has now been in place for almost a year, allowing HMRC to collect income tax on most benefits in kind through an Employers payroll. Employers who register with HMRC to use the online payrolling benefits-in-kind (PBIK) service do not have to report them on a P11D form, thus reducing the administrative burden on employers while also ensuring that employees are taxed in real time on benefits they receive.

Under this service, currently the benefits that employers will not be able to payroll are vouchers and credit tokens, living accommodation, and interest free and low interest (beneficial) loans. From 6 April 2017, legislation is proposed to allow the payrolling of vouchers and credit tokens.

It should be noted that employers are also still required to complete a P11D(b) form to summarise the Class 1A National Insurance due on benefits in kind.

Don’t forget to register in time!

The deadline for registering to payroll benefits in 2016/17 is 5 April 2017. Failure to register in time will mean an employer will not be able to payroll benefits for 2016/17 unless a voluntary arrangement is reached with HMRC. The registration process is done online and is a straightforward process, however, should you need any help or guidance, our experts would be happy to help. 

Making good benefits in kind

The introduction of payrolling benefits has highlighted an issue in respect of employees “making good” the benefits in kind they receive from their employers.

Legislation allows for making good of benefits over a range of dates both within and after the end of the tax year in which the benefit arises. There is no uniform legislation covering this area and HMRC recently held a consultation on the matter. HMRC is proposing a uniform date of 6 July following the end of the tax year for benefits to be made good where this has not already been dealt with via the payroll before the end of the tax year

The consultation period has now ended and we will keep you posted on the outcomes. So please watch this space!

Got a question?

If you have about any area covered in this blog or would like to find out more about our payroll services, please get in touch with a member of our Employer Solutions team.