Compliance
of the expenses or benefits provided, and supporting information relating to the calculation of the figures included in the P11D returns. These records must be kept for a minimum of three years following the end of the tax year to which they relate and should evidence the fact that P11D reporting has been completed correctly.
is required to pay. If this is not done, HMRC will calculate the amount and the employer will be charged more. The completed form should be submitted to HMRC as soon as possible following the end of the tax year. ...payrolling benefits is ongoing, so employers only need to notify HMRC if they wish to deregister and cease payrolling benefits. HMRC will advise how much tax and class1B NICs are due prior to 19 October following the relevant tax year so that timely payment of amounts due can be made by this date or 22 October if paying electronically. Application for a PSA must be made by 5 July following the first tax year to which the PSA applies. The PSA will remain in place until either the employer or HMRC cancels it, or the employer needs to change it. There is no requirement to renew the PSA annually. Payrolling of benefits A practice growing in popularity is that of processing benefits through payroll. This means that the value of employee benefits are reported in real time, and tax and class 1A NICs applied to them at the same time as they are received. Payrolling may be something that employers may wish to consider to assist their employees in navigating their finances in the current economic climate. If a benefit is processed via payroll, this removes the requirement for a P11D return for that particular benefit for the specific employee. The majority of benefits can be payrolled, with the exceptions of employer-provided living accommodation, and interest-free and low-interest (beneficial) loans. Employers providing these benefits must ensure that they are reported via the P11D return, regardless of whether other benefits are being payrolled for the same employee.
In order to payroll benefits, employers must register with HMRC by 5 April preceding the tax year for which they wish to begin payrolling benefits. If this deadline is missed, the benefits cannot be payrolled until the following tax year. HMRC used to allow certain employers to ‘informally payroll benefits’ where they missed the deadline, but from tax year 2021/22 this practice is not permitted. Registration for payrolling benefits is ongoing, so employers only need to notify HMRC if they wish to deregister and cease payrolling benefits. This must be actioned prior to the start of the relevant tax year using the online service (http://ow.ly/ EmOC30rGfSK). Once an employer has registered to payroll benefits, they must provide employees with letters confirming that they are payrolling and what the implications are for them. In addition to this, before 1 June following the end of the relevant tax year, the following information must be provided to employees: ● details of the benefits that have been payrolled ● the cash equivalent of each payrolled benefit ● the relevant amount that has been payrolled under optional remuneration arrangements ● details of the benefits that have not been payrolled, if applicable. The information can be included within employee payslips or detailed in a separate note or statement. Methods of reporting There are a variety of methods that employers use to report and pay taxable benefits and expenses provided to employees. What is apparent, is that regardless of the methods used there are stringent deadlines for employers to observe, and a very clear focus on ensuring accurate information is provided. It is also important for businesses to observe any associated record-keeping requirements. A recent Quick Poll, produced by the CIPP’s policy and research team suggested that although submitting P11D returns is still the most popular method to report taxable benefits (49%), employers are increasingly opting to payroll benefits (20%), with plenty choosing to combine the use of both methods (31%). n
P11D(b) return Employers must also give HMRC
additional information via the P11D(b) return by 6 July (the same due date as for P11D returns). Amongst other things, this states the total amount of class 1A National Insurance contributions (NICs) that the employer owes. A P11D(b) return must be submitted even if one or more benefits in kind are being payrolled. Payment for the class 1A NICs due on expenses and benefits provided to employees must be made to HMRC by 19 July. If payment is made using cheque, or 22 July, if it is being submitted electronically. Penalties can be imposed for late submission of the return and/or for late payment of the due amount of class 1A NICs. PAYE settlement agreements A PAYE settlement agreement (PSA) gives employers the option of making one annual payment which relates to the total tax and NICs due on expenses or benefits provided to employees that are deemed as being: minor, irregular, impracticable. Where a PSA is in place for items, there is no requirement to include them in P11D returns, to process via payroll to calculate tax and class 1 NICs, or to pay class 1A NICs on them at tax year end. Instead, class 1B NICs are payable as part of the PSA. In order to obtain a PSA, employers must write to HMRC Business Tax and Customs outlining the expenses and benefits that it will cover. Once an agreement has been made on what can be included, HMRC will send the employer two draft copies of form P626, which should both be signed and returned. If the request is authorised, HMRC will send back the form, which becomes the agreement. Form PSA1 (http://ow.ly/ KNOq30rGfUX) can be used to calculate the overall amount that the employer
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| Professional in Payroll, Pensions and Reward |
Issue 71 | June 2021
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