COMPLIANCE
Benefits reporting
Lisa Sheldon MCIPPdip, CIPP payroll advisory officer, sheds light on the process for reporting benefits in kind (BiKs), a popular query topic for our Advisory Service
I n January 2024, HM Revenue tax and class 1A National Insurance contributions (NICs) on BiKs through payroll would become mandatory from April 2026. P11D and P11D(b) returns are still required for tax years 2023/2024, 2024/2025 and 2025/2026. While the upcoming changes are still two years away, the year-end process for 2024/2025 is approaching fast. Employers are encouraged to plan their transition for real-time reporting and start considering how they will move to payrolling benefits. Thought will need to be given to how the data is gathered, especially if this is held across multiple systems or in bureaux. and Customs (HMRC) announced that reporting and paying income Procedures and policies Stringent procedures and policies must be in place as reportable items come in many forms, and there are different rules for what employers must report and pay depending on the type of expense or benefit provided. Taxable benefits must be reported to HMRC via a form P11D and P11D(b) by 6 July following the end of the tax year in which the employee or director received the benefit. This can be reported via HMRC’s pay as you earn (PAYE) online service if you have fewer than 500 employees on the payroll. Using information reported to HMRC on the P11D, the employee pays their income tax through an adjustment to
their PAYE code from a HMRC notification (PAYE11130). A P11D(b) is completed and reported to collate the total amount of Class 1A NICs that is due on the taxable benefits. “Employers are encouraged to plan their transition for real-time reporting and start considering how they will move to payrolling benefits. Thought will need to be given to how the data is This payment must be made to HMRC by 19 July following the end of the tax year, or 22 July for electronic payments. There will be fines, penalties and interest if the return is not submitted or if it is submitted late. gathered, especially if this is held across multiple systems or in bureaux”
collected over the pay periods in the tax year by commencing the procedure to payroll benefits. Agents or employers can register for payrolling BiKs using the payrolling employees’ taxable benefits and expenses online service, which must be completed from the start of the 2025 to 2026 tax year. P11Ds need to be submitted only in respect of benefits that cannot be payrolled, such as employer-provided living accommodation and interest-free and low- interest beneficial loans, due to the level of administration and complexities involved. However, the employer is still required to submit a form P11D(b) tax return. Mandatory payrolling The 2025/2026 tax year will be the last one that HMRC will accept forms P11D and P11D(b) for annual reporting, and planning for change is crucial. Real time collection introduces both operational and communication challenges that employers must address proactively. If you choose to payroll BiKs before 2026 and the benefits are collected via the payroll, employees must be given either a payslip, letter or an email to confirm what is being payrolled and this notification must be received by 1 June after the end of the tax year. Communication is imperative to advise employees they will not be taxed twice because you have registered to payroll benefits with HMRC before the start of the new tax year.
Alternative to P11D: payrolling of benefits
You can opt to distribute the cash equivalent of tax on employee BiKs
| Professional in Payroll, Pensions and Reward | February 2025 | Issue 107 18
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