February 17th, 2017 / Insight posted in Articles

Payrolling benefits – action needed before 5 April 2017 if your clients want to payroll benefits instead of completing P11Ds

If employers want to avoid completing P11Ds and payroll their benefits for 2017/18, they need to apply to do so before 5 April 2017.

Since 6 April 2016 employers have had the option to process benefits in kind through the payroll. So long as the relevant tax is collected through the payroll, there will be no need to complete P11Ds for these benefits although a P11D(b) will still be required to account for the Class 1A National Insurance contributions.

Employers intending to payroll any benefits must register them with HMRC using the payrolling employees taxable benefits and expenses service. This must be done before the start of the tax year i.e., before 6 April 2017. Employers must be registered with HMRC’s PAYE online service before they can enrol.

Registration is continuous, so if employers have registered for 2016/17, this will continue into 2017/18 unless they deregister.

The tax codes for all employees receiving payrolled benefits will be amended by HMRC so that they are not taxed twice on the same benefit.

Once an employer has registered to payroll benefits, they must provide their employees with a letter explaining the position and what it means for them. Template letters are available on HMRC PAYE online once the employer have registered for payrolling benefits.

Employers must also provide employees with the following information by 1 June following the end of the tax year:

  • Details of the benefits that have been payrolled
  • The cash equivalent of each benefit that has been payrolled
  • Separate details of any benefits that haven’t been payrolled

The information can be provided on employees’ payslips or a separate note or statement.

Any questions, please let your normal contact partner know and they will ask one of our specialists to call you