COMPLIANCE
Reporting benefits
GemmaMullis ACIPP, CIPP policy and research officer , discusses salient issues and provides timely reminders
W hilst the coronavirus pandemic has dominated almost every aspect of life, what is deemed as ‘business as usual’ tasks still need to be considered by the payroll industry, even more so with the end of the tax year approaching. Almost every business offers their employees some sort of benefit, the majority of which will need to be reported to HM Revenue & Customs (HMRC). How this is done will depend on the choices the employer makes. Payrolling of benefits Since 6 April 2016, employers have been able to register to payroll their benefits, meaning that the taxable benefits given to their employees would cease to be reported via a P11D return, but the relevant income tax and class 1 National Insurance contributions (NICs) would be processed via pay as you earn (PAYE) each pay period. Most benefits can be payrolled, with the exceptions of employer-provided living accommodation and interest-free and low interest (beneficial) loans. If these benefits incur a tax liability, they must still be reported via a P11D. Although reporting benefits via a P11D return is not required if they are payrolled,
the employer still needs to complete and submit a P11D(b) return where class 1A NICs liability applies to them. Employers intending to payroll benefits and expenses must register to do so with HMRC. This is done by using the payrolling employees taxable benefits and expenses service (https://bit.ly/2MclA64) before the start of the tax year. When registering, employers must select which benefits they wish to payroll. This only needs to be done in the first year, as there is no requirement to reconfirm for each subsequent tax year. Where the registration deadline has been missed, employers will be unable to payroll employees benefits for that tax year, unless they have a valid reason. If this is the case, HMRC will agree with the employer that they can informally payroll in which event they can payroll the benefits and collect the associated liabilities via PAYE; however, they will still need to complete P11D returns for their employees, making a note in each that the benefit has been processed via PAYE. If an employer chooses to stop payrolling a benefit, this will also need to be actioned before the start of the tax year in which payrolling is to cease. If the tax year in question has started, the employer must wait until the end of the
tax year before stopping. The employer will still need to continue to deduct tax each payday and report this deduction via PAYE. Once an employer has registered to payroll benefits, employees must be provided with a letter explaining that their benefits will be payrolled, and an explanation of what that means for them. The letters must include details of the benefits that are payrolled, with information provided about: ● the cash equivalent of each benefit payrolled ● the relevant amount that has been payrolled for optional remuneration arrangements (OpRA) ● benefits that have not been payrolled. Annual statements should also be issued to give the employees details of their payrolled benefits, which must be provided before 1 June after the end of each tax year. This information can be given via an employee’s payslip, however, it should be clear to the employees which benefits have been subject to PAYE tax, and how much of the value of each benefit the employer has collected and reported tax on. If an employee files a self- assessment tax return, they will need this information to inform HMRC. Employers must tell new employees with payrolled benefits how these will be taxed, and advise them that: ● their tax code may be amended in relation to any benefits from previous
...letters must include details of the benefits that are payrolled...
| Professional in Payroll, Pensions and Reward | March 2021 | Issue 68 30
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