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Payrolling benefits

23 March 2017

 

From 6 April 2017, HMRC are introducing a new way to report benefits in kind (BIK) to them. Currently, forms P11D are completed for each employee at the end of a tax year but HMRC are giving employers the choice to continue with this method or by reporting the cash equivalent value of the benefit through the payroll.

The benefit of this is to reduce the administration at the end of the tax year by having to process a P11D and also it keeps your employees records up to date. This results in them paying the tax as they receive the benefit rather than being hit with a tax bill once the tax year has passed, when the P11D forms get submitted.

Please note that some types of benefits cannot be payrolled and these include:

  • living accommodation
  • beneficial loans  (loans made to employees and/or directors)
  • credit tokens/vouchers.

Therefore a form P11D will still be required for these benefits.

Please note a P11D (b) (a summary sheet which shows the total amount of benefits and the class 1A due for payment) will still need to be submitted at the end of the tax year no matter which option you should choose. (You will need to check if your software package provides this facility).

If you would like to payroll the BIK then you must register with HMRC before the start of the tax year and you must payroll the benefits for the full tax year. If you miss the deadline, you cannot payroll the benefits until the start of the next tax year.  For example if you register by 5 April 2017, then you will need to payroll all BIK for the period 6 April 2017 to 5 April 2018.

For further information regarding payrolling BIK, please do not hesitate to contact us or alternatively to visit the HMRC web page please click here.

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