PAYROLL INSIGHT
SamanthaMannMAATMCIPPdip, CIPP senior policy and research officer, presents findings from responses to a survey recently conducted Payrolling – yes or no?
T here was a time, not so very long ago, before real time information (RTI) processing was introduced and before the Office of Tax Simplification (OTS) began their vital work, when the word ‘payrolling’ would have had little or no meaning to many payroll practitioners. Yet the taxation of the value of the benefits in kind (BIKs) through payroll processes was an area that many CIPP members at the time were keen to see become a standard part of the payroll process. Since then a number of research projects and consultations have been carried out to establish how payrolling could best be delivered and finally in April 2016 HM Revenue & Customs (HMRC) introduced a new and entirely voluntary online service for payrolling BiKs and expenses (http://bit.ly/2uL3egN). Pros and cons of payrolling One of the biggest ‘win, win’ outcomes predicted as a result of the delivery of the online payrolling service was that for those employers that registered to payroll their BIKs using the online service, P11D returns would no longer need to be submitted (and subsequently processed by HMRC). The disadvantage is that not all reportable BIKs are yet included within the service. The value of BiKs of any living accommodation and/or beneficial loans provided cannot be payrolled for employers using the service. Class 1A National Insurance contributions (NICs) are still due on the value of BIKs and whilst it is widely anticipated that (in time) this cost could become a ‘real time’ payment for employers, it is at present still an annual payment that is reconciled to the value of the BIKs processed throughout the tax year
using the P11D(b) return. Another disadvantage yet to be
an effective integration with real time information.” The OTS also noted in that review that if medical cover, cars/vans and motor fuel were to be payrolled, that would account for 81 per cent of the income tax and NICs revenues from employee benefits. Yet the take-up numbers of employers registering to payroll their BIKs remains low. Why is that? Barriers to payrolling Throughout February and into March 2019 the policy and research team, together with HMRC, ran a survey to gather information to help inform HMRC what barriers currently exist which prevent employers and their agents from choosing to payroll BIKs. Just over one in three respondents (35%) confirmed that they currently payroll BIKs, giving these reasons for doing so: ● no burden of P11D returns ● saved costs by not using P11D software provider ● software doesn’t have the functionality to produce P11D returns ● easier to payroll the benefits than ‘P11D’ them ● accurate and real time tax calculations for employees ● to take control over changes to employees’ taxable pay and offer added value to them ● belief that payrolling is the future. Almost two in three respondents (65%), however, do not currently payroll BIKs. In response to the question whether there were any barriers that were preventing them from doing so, the results show that: ● processes are too complicated – 38% ● guidance is not clear – 41%
overcome, is that agents and payroll service providers cannot register to use the service on behalf of their clients. For many, this is proving to be something of a stumbling block. ...reconciled to the value of the BIKs processed throughout the tax year using the P11D(b) return... One of the overwhelming advantages suggested to us has been the simplicity in which the service works. Anecdotal evidence provided by CIPP members and from professionals working across all affected sectors, is that the service has worked well, both for themselves and for their employees. Indeed, for a new digital service, it appears to have received a remarkably small number of complaints – and indeed seems to be delivering what the OTS suggested in its report Review of employee benefits and expenses (http://bit.ly/2Uj4QgP): “This new framework would be supported with clear HMRC guidance, including detailed information on how employers could payroll specific benefits. There would also be a streamlining of HMRC processes to remove benefits more quickly from the employee’s tax code when HMRC has been notified that the benefit is either being payrolled or is no longer being received by the employee. The mechanics for payrolling benefits should include a clear process for handling errors and
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| Professional in Payroll, Pensions and Reward | May 2019 | Issue 50
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