Payrolling benefits versus P11Ds
Payrolling benefits versus P11Ds
Mon 14 Dec 2015
Currently employers must complete a form P11D for each employee to whom they provide benefits in kind or reimburse expenses so that the correct amounts of tax are paid.
As part of the reforms recommended by the Office of Tax Simplification, from 2016/17 employers will be able to payroll certain benefits and expenses instead filing P11Ds, This is for benefits and expenses which are required to be reported to HMRC by 6 July 2017.
Whilst tax year 2016/17 still seems quite some time away, employers who wish to payroll benefits and expenses will have to register with HMRC before the start of the new tax year, i.e. by 5 April 2016. Furthermore, employers not registered by 21 December, and their employees, may be sent multiple tax codes, so HMRC’s advice is to register before 21 December.
Employers wishing to payroll benefits and expenses will also need to make sure their payroll software is compatible with the changes.
One size doesn’t have to fit all
Employers will be able to choose which benefits and expenses they want to include in the arrangement but payrolling will not be available, in 2016/17 at least, for:
- vouchers and credit cards
- living accommodation
- beneficial loans
Potential efficiency savings
Payrolling benefits provides the opportunity to reduce reporting obligations and will create efficiencies for some employers, particularly those who provide simple benefits such as private medical insurance.
The picture is still developing
Further guidance is still to be provided by HMRC but employers will need to take care in ensuring they have the capability to calculate the benefits correctly at the start of each tax year and deal with any changes that may occur in year. It is likely to be the employer’s responsibility to deal with underpayments and overpayments and this may not be straightforward.
Annual returns still needed for NIC.
Despite forms P11D no longer being required under the new system, forms P11D(b) will still be required each year to report the Class 1A NIC due.
For help from Mazars
Please contact Stuart Law on 0207 0634213 or Vaneeta Khurana on 0207 0634143 for more information
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