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Payrolling benefits in kind

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9 December 2015

From 6 April 2016, it will be possible for certain employee benefits and expenses to be taxed through the payroll.  Although payrolling of benefits is not a new concept, there was still previously the requirement to report the benefits on a P11D.  The new Payrolling Benefits in Kind (PBIK) online service, removes this reporting requirement which could significantly reduce the administration burden for some employers.

Employers must register by 5 April 2016 to use the service for the 2016/17 tax year, however, HMRC guidance recommends that the employer should register before 21 December 2015 to avoid being sent multiple tax codes.

The new service may not be suitable for all businesses as it will not be possible to payroll the following benefits:
  • vouchers; 
  • living accommodation; and 
  • loans.  

The employer can pick and choose which benefits they would like to payroll, however, in reality this service will be of most benefit to those that can payroll all employee benefits which will remove the need for P11Ds altogether.  If you continue to informally payroll your employees’ benefits, rather than registering via the new service, P11Ds will still need to be filed.

Employers will also need to ensure that their payroll software has the capability to collect the correct amount of tax on Benefits in Kind and HMRC have advised that this will not be possible for those using HMRC’s Basic PAYE Tools software.

The administration of class 1A National Insurance contributions will remain unchanged under this service and a P11D(b) form will still need to be completed after the end of the tax year and the relevant liability calculated and paid.

If you would like any advice on the new PBIK online service and how it could help your business, please do get in touch with our tax team.