COMPLIANCE
You should include the following information: l details of the benefits payrolled, the value, the cash equivalent and which ones have been subject to income tax l the amount(s) payrolled for optional remuneration arrangements (OpRA) l details of benefits not payrolled. Employees need to be informed of what will happen during the first year when their BiKs are payrolled. They need to know that their tax code will change to take out the adjustment for their taxable BiKs and that notional tax is being collected from their net pay. At the end of the year, you will communicate how much taxable benefit they have had in that year. In some situations, employees could be issued with a tax code change reflecting benefits received in the previous tax year, while at the same time paying for benefits currently payrolled in this current tax year in real time. This is due to a legacy payment of PAYE from the previous tax year, plus the current real time PAYE being paid for the current tax year. Some believe this to be double taxation but rest assured, this is not the case. The tax paid relates to two separate tax years. It would be beneficial to note that if any new employee starts in the tax year 2025/2026, you should advise them to contact HMRC to report the benefit start date and the cash equivalent amount via their government gateway account or HMRC app. Also, ensure the P46CAR is completed as soon as possible to notify HMRC to collect the income tax via a tax code change in the same tax year that the employee received the benefit. If you have been asked by HMRC to submit a P11D(b) return and you have
nothing to declare, you can confirm that there are no Class 1A NICs due by completing the ‘online declare no return of class 1A National Insurance Contributions’. “In some situations, employees could be issued with a tax code change reflecting benefits received in the previous tax year, while at the same time paying for benefits currently payrolled in this current tax year in real time” Salary sacrifice and OpRA From 6 April 2017, changes to Income Tax Earnings and Pensions Act (ITEPA) 2003 Section 69A mean that the income tax and NICs aadvantages where BiKs are provided through salary sacrifice were largely withdrawn. This is where an employee gives up the right to an amount of earnings in return for BiKs. This change has been instigated to redress the advantages of paying less income tax and NICs in comparison to what they would have paid if they had been paid entirely in cash. This limits tax advantages by addressing certain benefits (type A or B arrangements) under OpRA, and that they are treated as taxable earnings: l type A arrangements: the employee
gives up the right, or the future right, to receive an amount of earnings, which would be chargeable to tax under ITEPA S62 in return for the benefit l type B arrangements: other than type A arrangements under which the employee agrees to be provided with a benefit rather than an amount of earnings (for example the option of a cash allowance). A benefit provided under OpRA includes any benefit or facility, regardless of its form and the way it is provided. EIM44000 offers further guidance. Salary sacrifice affects the employee’s terms and conditions of employment and is a matter of contractual employment law whereby stringent policies must be in place. n
Links corner Expenses and benefits: A to Z: https://ow.ly/bZY350Uop6o Expenses and benefits for
employers: https://ow.ly/cfkF50Uopio PAYE Online for employers: https:// ow.ly/Mlnt50UMGNM PAYE11130 - Coding: codes: how they are used and calculated: viewing tax code history: https:// ow.ly/yUov50UopTx How to use the payrolling benefits and expenses online service: https:// ow.ly/kt0U50Uoq5V Payrolling: tax employees’ benefits and expenses through your payroll: https://ow.ly/KKa350UoqfV Declare no return of Class 1A National Insurance contributions: https://ow.ly/Fbhb50UMGRL EIM44000 - Optional remuneration arrangements: Contents: https:// ow.ly/lZrh50UoqsR.
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| Professional in Payroll, Pensions and Reward |
Issue 107 | February 2025
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