Can we reduce our payroll compliance obligations?

Basically yes you can now.

At present employers that provide a Benefit In Kind (BIK) like healthcare or a company car have to complete a P11D at the end of each tax year. In the case of company cars a P46 (Car) form also requires submission. The employee then includes that information on their personal tax return and will pay tax on that benefit in the future (as a one off payment or adjustment of their tax code). This can be an administrative burden for small companies with numerous benefits or companies with large car fleets, so is there a way of reducing that compliance obligation?

Employers now have the option to avoid the need to submit these forms every year by collecting any BIK tax due through the payroll. In order to do this companies must register using the online Payrolling Benefits in Kind service run by HMRC by 5th April 2016 (if they wish to use the service for the 2016/17 tax year as it can’t be done part way through the year).

Employers will need to calculate the BIK tax benefit for each employee then deduct it equally each month through their payroll system. The benefits are :

  • A reduction or elimination of P11D and P46 (Car) forms required;
  • Tax is collected from the employee and paid over to HMRC in real time;
  • Elimination of an annual catch up of tax due after the end of each tax year;
  • Reduction in adjustments to employees tax codes during the year.

It is expected that employer Class 1A National Insurance contributions will still need to be calculated and paid over annually as is presently the case,  but this new system could potentially offer considerable savings in admin time to busy payroll departments.



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