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ISSUE 4
equivalent of the benefit under the tax rules. If the full cost is made good, there is no taxable BiK. Employers need a process for checking making good has occurred. If an employee is only making good in part, this needs to be considered when calculating the amount to be payrolled. Again, we have special rules if making good relates to company cars’ and vans’ private fuel. How should employers communicate payrolled BiK to employees? When BiK are taxed through the payroll employees should receive: a letter explaining the concept of payrolling benefits, how it operates, and its implications, including the deduction of tax through payroll and changes to their tax code. This also applies to new employees who receive benefits that the employer has registered to payroll. Each year, before June 1 following the end of the tax year, details of: The benefits that have been payrolled in the tax year. The cash equivalent of each benefit that has been payrolled in the tax year.
6th after the tax year the benefit was received. However, over the duration of the BiK, the appropriate amount of tax should be deducted, whether through payrolling or traditional methods. What about employers’ Class 1A NIC? Although the tax due on the BiK is being collected in ‘real time’ under voluntary payrolling, no provision has currently been made for the collection of Class 1A NIC on a real-time basis. The employer still currently needs to complete the P11D (b) and calculate Class 1A NIC. Again this may change in future. What about globally mobile employees? Employers with a globally mobile workforce will face various considerations. This includes UK-based employees on overseas assignments or working remotely from abroad, as well as overseas employees on assignment in the UK. For employees assigned to the UK, the new rules will highlight the practical issues and challenges of obtaining benefit details in real-time when benefits are provided outside the UK. HMRC acknowledges these challenges and, for example, allows PAYE to be calculated on a best-estimate basis for tax-equalised employees (i.e., when an employer settles any UK tax and National Insurance (NIC) liabilities due for an employee) under a Modified PAYE scheme. This scheme involves reconciling any tax due upon filing an employee’s UK tax return, with an extended P11D submission deadline of 31 January. Where NIC is payable,
What is the biggest worry for employees?
Double taxation is the biggest concern, but the only instance of quasi ‘double’ taxation that should occur is when the employee is compensating for an underpayment from the previous year, which would have happened regardless. This often occurs with benefits reported on the P11D during the second year, as the first P11D is not submitted until July
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