Changes to Pay-rolling Benefits in Kind

Changes to Payrolling Benefits in Kind

From April 2016 an employer can choose to include benefits in kind paid to their directors and employees through the payroll.

All Benefits can be included except:

  • Vouchers and credit tokens
  • employer provided living accommodation
  • interest free and low interest loans

The advantage of this is that the employee pays the correct amount of tax on these benefits on a monthly basis. At present estimated benefits are included in PAYE codes. There is usually therefore an under or overpayment to tax at the end of each year.

The advantage to the employer is that Forms P11D may not have to be submitted each tax year. However a Form P11d (b) will still be required before 6 July each year to account for the Class 1A.

Whilst we can see the benefits of doing this the additional administrative burden to employers far outweighs the benefits:

  • Once registered an employer must provide employees with a letter explaining what payrolling is
  • Provide employees with the following information before 1 June following the end of the tax year:
    • A description of the benefit
    • The cash equivalent of each benefit that has been payrolled
  • Still submit a P11D to HMRC for any benefits that are not payrolled.
  • Still submit a P11D(b) to HMRC to account for Class A NIC.
  • Should anyone wish to register to payroll their benefits in kind you must register with HMRC before 6 April 2016. The employees must then ensure their PAYE codes are changed to remove any benefits previously included.

To find out more please contact Angela Carr on 0113 2574506 or email [email protected]