Unique to the United Kingdom, the annual P11D process remains a muddle for many. The P11D is a statutory form required by the HMRC from UK based employers detailing the cash equivalents of benefits and expenses that they have provided during the tax year to their employees. The process of filing P11D is an accounting function done outside of payroll and is often an afterthought for foreign businesses new to the UK. The HMRC for the past few years launched a pilot program with some Employers regarding the “payrolling of benefits (PBIK).” The pilot program seems to have been successful. Employers can now voluntarily collect the tax via payroll on benefits provided to employees without having to submit forms P11D to HMRC. This process will cover most benefits except for living accommodation and beneficial loans.
Employers can continue to deal with employee benefits through forms P11D at the end of the FY; so, every employer has a choice as to which route they should go.
What needs to happen if you are looking to start “payrolling benefits?”
In order to payroll benefits employers will need to register with HMRC before the start of the applicable tax year, hence prior to 5 April 2017 for the 2017/18 tax year. This process will require the employer to calculate each employee’s annual benefits (which would usually have to be reported on form P11D) then apportion these between their respective pay period (i.e. monthly and add these to their employment income for that period on the payroll). Payrolling of benefits will mean employees no longer need adjustments in their tax codes for benefits in kind.
The following steps should be taken:
• The Employer needs to register for PBIK with HMRC via the following link: https://www.gov.uk/guidance/payrolling-tax-employees-benefits-and-expenses-through-your-payroll As mentioned above, this registration must be completed before 5 April for PBIK to be operated from the new tax year 2017/18. Once registration has been completed no reregistration process is required moving forward. However, you can only PBIK from April; it cannot be set-up mid-tax year.
• The registration is continuous; therefore, you only need to tell HMRC if you decide to deregister. You can do this before the start of the tax year. If the tax year has started when you change your mind, you must wait until the end of the tax year before you stop payrolling.
• All benefits can be payrolled except employers provided living accommodation and interest- free and low interest (beneficial) loans.
• Your payroll provider would need a list of the cash benefits for each employee. When there is more than one benefit to being payrolled, each benefit needs to be itemized separately.
• Should you wish to PBIK company cars the payroll provider would need the details of the Car: Registration no., Make and Model, Engine Size, Date first registered, Type of fuel, CO2 Emissions, Car list price and date first used by the employee.
• Should you wish to have any changes in benefits during the year, this would need to be advised to your payroll providers with your standard changes submission.
• At tax year end, your payroll provider would calculate the class 1A due on the PBIK and complete the form P11d (b). As previously mentioned this is an additional service provided.
• If you decide to payroll benefits, you must communicate this decision to your employees.
Since payrolling of benefits is voluntary and new, not many payroll providers publicizing/advertising this information currently. As it is a recent development, the payroll market wants to get a feel for the process via a couple of early adopters to establish the best way to manage the process.
Employer alerts are provided by Kira Rubiano, Sr. Partner Management Specialist –