In our most recent tax tips note we examined two more issues which you may need to discuss with your clients before 6 April 2017: payrolling of benefits, and contracts for services provided to the public sector. We also looked at traps concerning pension savings and how to access them. Don’t let your clients get tripped up by the complex rules in this area.
Below we share just part of one of the above 3 tax tips – see the side boxes on this page to learn how you could subscribe to receive the full 3 tax tips every month.
Payrolling of benefits in kind
Some employers have been taxing certain benefits in kind through the payroll (known as “payrolling”) for some years. From 6 April 2016 payrolling became a statutory choice for all employers, as we explained in our newsletter on 11 February 2016.
When benefits are payrolled they don’t have to be reported on the form P11D after the end of the tax year, and the employee’s PAYE code doesn’t have to be altered during the year. Where a company car is payrolled the employer is not required to submit a P46(car) during the tax year.
As employees are likely to be in receipt of benefits in kind before payrolling of the benefit starts, HMRC need to know which employees and which benefits are to be payrolled before the start of the tax year. HMRC will then amend the PAYE codes of those employees to take out the benefit in kind, otherwise the employee would be taxed twice on the same benefit.
To inform HMRC of the detail of which employees and which benefits are to be payrolled, this data needs to be submitted to HMRC using an online service set up for this purpose. The employer has to do this, as facilities for agents have not been built into this service. Ideally this information needs to reach HMRC well in advance of the beginning of the tax year, to allow sufficient time for the 2017/18 PAYE codes to be altered.
HMRC are hosting three short interactive webinars to explain payrolling on 16, 17 and 21 February. Please note that the article on payrolling in the latest Employer Bulletin (issue 64) contains some inaccuracies. Our employment tax experts are happy to answer any of your questions regarding payrolling.