Employment Taxes Update - Voluntary payrolling of benefits
A number of employment tax changes announced over the past year are due to come into effect from 6 April 2016.
This is the first of a series of briefings which employers will need to consider leading up to the beginning of the new tax year.
Voluntary payrolling of benefits
Employers intending to, or who already, payroll benefits and expenses must enrol to use HMRC's online service - Payrolling Benefits in Kind (PBIK). Employers who use this service and payroll benefits and expenses will no longer have to report the amounts on a P11D from 6 April 2016, onwards.
Key dates for enrolment
The key dates you need to be aware of if you intend to payroll benefits from 6 April 2016 are:
- 21 December 2015 – employers are encouraged to enrol to use the PBIK service by this date to avoid being sent multiple tax codes for employees; and
- 5 April 2016 - employers must enrol to use the PBIK service by this date as they won’t be able to register afterwards for the 2016/17 tax year.
How do I enrol to use the service?
To use the PBIK service, employers will need their Government Gateway ID and password to sign in to HMRC’s Online Services and then enrol for employer PAYE.
To enrol for employer PAYE, employers will need their PAYE reference and Accounts Office reference numbers. Once enroled, HMRC will send an activation code in the post which can then be used to confirm enrolment.
Employers not registered for HMRC’s Online Services will need to do so before they can enrol to use the PBIK service.
Once enrolment is confirmed, employers will then be able to:
- Choose which benefits and expenses they want to include in the payroll for the following tax year;
- Add or remove benefits and expenses; and
- Exclude employees who receive benefits or expenses but don’t want them payrolled - for these employees, employers must continue to report the benefit or expense on a P11D (employers can exclude an employee at any time in a tax year but once done it cannot be reversed during the year).
HMRC will then be able to identify all employees who have the selected benefits or expenses in their tax codes and issue amended tax codes, after removing the selected benefits or expenses.
Which benefits cannot be payrolled?
The only benefits employers cannot payroll using the PBIK service are:-
- Vouchers and credit cards;
- Living accommodation; and
- Interest free and low interest (beneficial) loans.
Employers already payrolling these benefits can continue to do so but must still report them on a P11D.
How do I payroll benefits and expenses?
Before making the first main relevant payment to an employee in a tax year, the employer will need to:
- Calculate the cash equivalent of the benefit;
- Determine the notional value to be added to the payroll each pay cycle; and
- Account for tax as usual by reference to the employee’s tax code.
How employers submit forms P11D will depend upon which payments they have processed through their payroll.
Up to 5 April 2016, where an agreement to payroll benefits has been agreed with HMRC, employers must:-
- Complete the “amount made good or from which tax deducted” fields where this applies;
- Complete a P11D(b) including the total benefits and expenses provided, even though they have been put through payroll;
- Submit P11Ds for employees and directors electronically. Agreement should be obtained from HMRC prior to electronic submissions by completing their online form; or
- Submit P11Ds by paper and mark the paper submission “PAYROLLED”.
2015/16 P11D due dates
As a reminder the key dates employers need to keep in mind are:
- 6 July – deadline for filing forms P11D and P11D(b) and for providing copies of the forms P11D to employees.
- 19 July – deadline for postal payments to reach HMRC's Accounts Office for any outstanding Class 1A National Insurance.
- 22 July – deadline for electronic payments to reach HMRC's Accounts Office for any outstanding Class 1A National Insurance.
2016/17 and later
Employers using the PBIK service will only have to prepare forms P11D for those employees or directors provided with taxable benefits and expenses which are not processed through payroll.
For further advice regarding the payrolling of benefits, please contact Nick Bustin, Director of Employment Tax, on 020 7969 5578 or via email firstname.lastname@example.org.