Payrolling benefits - the positives and the negatives
Do your clients payroll taxable benefits for clients? A quick examination of the positives and negatives of doing so.
In April 2016 HMRC introduced the facility for employers to payroll the taxable benefits provided to their employees. This is voluntary for employers to apply for if they so choose. If an employer wants to use this they must register with HMRC before the start of the tax year, therefore if they want to use it for the tax year starting on 6 April 2020 they need to register by 5 April 2020.
During the registration process the employer will tell HMRC which benefits they want to payroll.
The main benefit of this facility is that the employer will not have to submit a form P11D. Also the tax codes for the employees supplied by HMRC to the employer using the Notice of Coding should not change as often. Employers will only need to complete forms P11D for the benefits that have not been payrolled.
The main disadvantage is that the employer needs to calculate the ‘cash equivalent’ of the benefit and then spread this over the year so that the correct amount is shown in each payroll.
The employers’ class 1A National Insurance will still be due on the normal due date for payrolled benefits and any other benefits, using the usual form P11D(b) procedure.
The employer can payroll all benefits except employer-provided living accommodation and interest free and low interest (beneficial) loans and can register online for these payrolling benefits.