PAYE: A warning and an opportunity
Payrolling has become an increasingly popular way for employers to pay the tax due on benefits provided to employees.
The use of payrolling means that your employees will not find themselves in the tricky position of having to pay the tax on two or three years of benefit at the same time. Taxable benefits are put through your payroll on a current basis in the same way as cash earnings. The employee therefore pays the correct amount of tax when the benefit is received. You, as an employer, will have less administration, and self-assessment will be simpler for those employees who need to complete a tax return.
Until 5 April 2016, payrolling was allowed by HM Revenue & Customs (HMRC) on an informal basis, but be warned that on that date any existing informal arrangements will have to stop (except if you have previously been payrolling benefits in respect of living accommodation, beneficial loans, vouchers and credit cards. Then you will be able to continue to do so, and P11Ds will still be necessary.
In order to payroll benefits for 2016/17, you must register with HMRC by 5 April 2016 using the online Payrolling Benefits in Kind (PBIK) service. It will not be possible to register after the start of the tax year.
Of course, you should ensure that your payroll software can payroll benefits before registering. With informal payrolling, it was still necessary to include payrolled benefits on P11Ds, but you will now not have to report payrolled benefits. If you cannot use the PBIK service, then benefits will have to be reported on P11Ds.
If you have not previously payrolled benefits, the flexibility offered by the PBIK service gives you the opportunity to now do so. Most benefits, including company cars, can be payrolled; the exceptions are living accommodation, beneficial loans, vouchers and credit cards. You can choose which benefits to include and any employee who does not wish their benefits to be payrolled can be excluded. The payrolling of company car benefits will avoid the need to complete P46 (car) forms. Once you have registered to payroll a particular benefit with the PBIK service, then that registration is automatically carried forward to future tax years. But once the tax year has started, you will have to continue to payroll that benefit for the whole tax year.
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