HOT TOPIC
must be increased to reflect the elements currently reported on P11D and P11D(b) forms. You can quickly start to see why software developers in particular may need the additional time to make the necessary system amendments before the process is made mandatory. The technical note seems to suggest that well over 100 new fields will be needed. Certainly not an overnight job! It’s prudent to note here that employers will only be required to provide data relating to benefits they offer, and no information will be required in relation to benefits they don’t offer. Additionally, HMRC has confirmed that its Basic PAYE Tools will be updated to deal with the changes accordingly from April 2027. Calculations Calculations will remain unchanged for those who currently use voluntary payrolling. In most cases, the annual cash equivalent of the BiK must be divided by the number of pay periods in the year. This figure is then processed as a notional pay element through the payroll for the purposes of tax and Class 1A NICs. Where the BiK value isn’t known at the start of the tax year, a reasonable estimate must be made as to the taxable value and then apportioned to the number of pay periods in the year. Where the cash equivalent changes mid-year, a revised taxable amount must be calculated to process through payroll for the remainder of the tax year. In scenarios where employers (and payroll) aren’t aware an employee has received a BiK, there’s the option of reporting that BiK as soon as possible in the remaining pay periods of that tax year. There’s no need to adjust previous
submissions if the BiK is properly reported and accounted for across the remainder of the tax year in question. It’s also recognised that there’ll be situations in which the income tax and Class 1A NICs couldn’t be determined within the tax year, this could include for fuel cards. There’s discussion around establishing a new BiKs update process which would be used to record any under or over payments of tax. Any details would then need to be reported by 6 July following the end of the tax year. Any Class 1A NICs must be paid by 22 July following the tax year end. The registration process From April 2027, employers won’t be required to register to payroll BiKs unless they’re voluntarily payrolling loans and accommodation benefits. Benefits will be removed from employee tax codes automatically in readiness for mandatory payrolling. Before that point, it will still be possible to voluntarily payroll most BiKs but registration will be required to do so. Tricky scenarios HMRC recognises there are nuances to reporting BKs and expenses in real time and addresses a number of issues, such as: l first year cashflow impacts for employees l the 50% overriding regulatory limit l employees and directors who receive no income l employees who receive BiKs and expenses after leaving their employment l retaining the P11D and P11D(b) for some cases l interaction with student loans l annual, quarterly, weekly, fortnightly and four-weekly payrolls
l payslip information and end-of-year notification l fuel cards for cars l coding adjustments. Full details on how the Government intends to address these issues can be found in the technical note.
So, what next? The Government has committed to
considering all feedback on the mandatory payrolling of benefits received between now and the autumn Budget later this year. At this point, HMRC will put together draft legislation, guidance and technical specifications. A full timeline is shared within the technical note. The CIPP’s Policy and Research Team have been working, and will continue to work, closely with Government and HMRC regarding the mandatory payrolling of benefits. If you have anything you’d like to raise, then please do reach out to the team by emailing Polcy@cipp.org.uk.
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| Professional in Payroll, Pensions and Reward
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Issue 111 | June 2025
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