Payroll
...a PSA remains valid until it is cancelled or varied.
employments ● the new benefit will not be included in their tax code ● any underpaid tax they may be paying through their existing tax code will still be collected this way. The traditional method Many companies still process benefits the traditional way, by completing and filing P11D returns. This is ether done by manually completing the form or processing via payroll software. If this method is used, employers must complete and issue P11D returns by 6 July following the tax year to which the benefits relate, to both HMRC and employees. Benefits reported via a P11D are then reflected within the employee’s tax code HMRC sends to both the employer and employee accordingly. Employees can check the calculation of their tax codes by logging into their personal tax account. Payrolling v P11D Whilst both ways of reporting benefits have their pros and cons, the payrolling of benefits offers better clarity to employees of the effect that benefits derived from their employment have on their pay. Employees are taxed in real time for such benefits and do not have to wait for their tax codes to be adjusted, meaning that the cost of the benefit is processed each pay period, and they do not have to wait until halfway through the following tax year to pay tax on that benefit. Class 1A NICs Regardless of which method is chosen to report expenses given to employees, any benefits provided that attract class 1A NICs liabilities must be submitted via a P11D(b) return. Employers are still required to calculate these NICs on the cash equivalent (or relevant amount for OpRA) and complete the P11D(b). Details of benefits supplied throughout the tax year should be recorded to enable employers to accurately report and submit P11D(b) returns by 6 July after the end of the tax year. Details of how to complete the return (and a template) are available at https://bit.ly/39OOr8V. PAYE settlement agreements Sometimes, a benefit may be provided which the employer wishes to include
in a PAYE settlement agreement (PSA). Employers must apply to HMRC to gain a PSA, but once in place a PSA remains valid until it is cancelled or varied. An employer wishing to change or cancel a PSA must send details to the HMRC office which issued it. Employers will need to report any outstanding tax and NICs due on benefits and expenses using P11D returns and form PSA1 accordingly, with tax and class 1B NICs due arising from a PSA being paid by 19 or 22 October after the tax year in question. Any class 1A NICs owed on expenses or benefits reported in P11D returns are to be paid by 19 or 22 July after the tax year in question. Any benefits provided after a PSA has been cancelled will need to be reported via either payrolling or P11D returns. Although there is not a deadline imposed on the employer for sending HMRC details of a PSA, there is for payment of the liabilities that arise from it. Good practice, however, is to send the PSA to HMRC as soon as possible in order for it to issue a remittance of what needs to be paid. Employers are reminded that they should not wait for a remittance to be received from HMRC in order to make their PSA payment.
during 2020 due to the pandemic, every aspect of ‘business as usual’ tasks have been affected, including how some benefits will now be reported, with some not needing to be reported at all. Items that relate to working from home now fall into new exemptions as well as employers providing or reimbursing Covid-19 tests, which have no tax and NICs liability. Employees who are provided with cycles or cycle safety equipment under cycle to work schemes prior to 20 December 2020 will now not have to meet the conditions which would exempt them from tax and NICs until June 2022. HMRC has also added Covid-19 as a reasonable excuse if an employer doesn’t meet the filing/payment deadlines. In cases where this happens, employers must be aware that in order to appeal a fine, the liability must be fulfilled (meaning the filing has been sent or the payment been made) for a reasonable excuse to stand. Guidance (https://bit.ly/2XXCY1g) now states: “If you or your business have been affected by coronavirus (Covid-19), HMRC will give you an extra three months to appeal any decision dated February 2020 or later. Send your appeal as soon as you can, and explain the delay is because of coronavirus.” Unaffected by the pandemic are the statutory deadlines imposed by HMRC. It would be good practice to keep a note of the entries in the table. n
Covid-19 and its effects With the constant changes that occurred
What needs to be done
Deadline
5 April, for the year the employer wishes to payroll
Register for payrolling
Send a statement to employees of payroll benefits
1 June, following the end of thetax year
Submit P11D returns online to HMRC 6 July, following the end of the tax year Give employees a copy of the infor- mation in the returns 6 July Tell HMRC the amount of class 1A NICs in the P11D(b) return 6 July Pay any class 1A NICs due 22 July (19 July if paying by cheque) Pay tax and class 1B NICs due under a PSA 22 October (19 October if paying by cheque)
Pay PAYE tax or class 1 NICs owed on expenses or benefits that have been payrolled
Monthly through payroll
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| Professional in Payroll, Pensions and Reward |
Issue 68 | March 2021
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