Employers urged to act to meet 21 December deadline for advising HMRC about payrolling benefits in kind


Employers will soon be able to include employee benefits, such as company cars, fuel or private health insurance, in their RTI payroll submissions each month. From the 2016/17 tax year, income tax and NIC on benefits in kind can be automatically deducted through the payroll at the control of the employer. This should both avoid the need for benefits to be coded out through an employee’s PAYE code and also for them to be included on a form P11D and submitted to HMRC after the end of the year.

“Putting benefits through the payroll is likely to reduce burdens for employers and their employees. Employers can find completing forms P11D burdensome and time consuming. In addition, the coding out of benefits usually lags behind the real benefits so often results in under or over payments for the employee,” said Tina Riches, head of national tax at Smith & Williamson, the accountancy, investment management and tax group.

HMRC received over 5 million P11D forms last year and so it is expected that many employers will transition to the new system, providing HMRC data much earlier than before. Employers have to inform HMRC of their intention to switch by 6 April 2016 for the 2016/17 tax year.

Once notified that an employer is joining the system, HMRC systems will automatically identify the employees with the relevant benefits in kind in their tax code and remove the benefits from their codes and issue fresh codes. However, if the employer tells HMRC of their intention by the imminent deadline of 21 December 2015, this should give HMRC”s systems time to remove the benefits in kind from their employees” coding notices, before they are sent out in the New Year.

“Where employers meet the 21 December deadline, employees coding notices should be adjusted in advance of the start of the next tax year. Otherwise, the benefit may be removed at a later stage, with no guarantee that it will be done before the start of the tax year, with the risk that their employees could be taken unawares and end up being taxed twice until the PAYE code is adjusted.

“Due to the brief period between HMRC announcing this and the deadline to inform HMRC of desire to switch, thousands of employees could suffer if their employers do not act swiftly. Employers can notify HMRC through the new online pay rolling in kinds PBIKs system – which frustratingly tax agents are not yet given access to, so providing an unlevel playing field as they are obliged by HMRC to resort to pen and paper or phones.”

“To ensure employees aren’t badly affected, employers should keep their employees informed as soon as possible of the implications if they start payrolling.”

“Employees can send a structured email to HMRC asking for adjustments to their own PAYE code, but this will not be as effective as the message coming from the employer. When the employer initiates this, HMRC will put a flag on the employee’s record to ensure that benefits in kind are not accidentally added back into the code on a subsequent coding run.”