Payrolling benefits - Is now the time to register?


Chris Campbell

Chris Campbell

Tax Senior Manager

13 October 2017


    Payrolling Benefits in Kind

    The voluntary scheme for payrolling benefits in kind has now been in place for almost two years and for many employers this will be a simpler system in terms of allowing HMRC to collect Income Tax on most benefits in kind through the payroll.  This is because employers who register with HMRC to use the online payrolling benefits in kind (PBIK) service do not have to report the items on a Form P11D, thus reducing the administrative burden on employers while also ensuring that employees are taxed in real time on benefits they receive.

    Benefits in kind are benefits that employees receive that do not come in the form of payment, including gym memberships, company cars and private medical insurance. Employers are able to choose which benefits to payroll, which provides a welcome element of flexibility.

    The scheme is designed to ensure that an employee pays the correct amount of tax, at the correct time on benefits in kind through their employment income, rather than wait for the tax payments to catch up after the end of the tax year.   Although HMRC has brought in a system of dynamic coding (see separate article), payrolling benefits accelerates the timing of any tax payments or refunds to within the tax year in which the benefits are provided.

    Any decision to payroll benefits does not affect the payment of Class 1A National Insurance by the employer, which is still made in the normal way after the end of the tax year.

    If you are an employer and need some assistance with payrolling benefits, please get in touch.  Our Employer Solutions team based across Scotland is here to help.