Benefits in Kind have to be reported via a P11D, as these are benefits an employee receives outside of the payroll but usually needs to pay tax for, such as a company car. There is also usually a National Insurance liability for the employer.
This is no longer quite true however, as now employers have the opportunity to report Benefits in Kind via the payroll instead.
Benefits in Kind and Payroll
The main advantage for the company of using payroll to report Benefits in Kind is that there is no longer a requirement to submit the P11D forms. You currently will still need to submit the form P11D(b) to report the Class 1A NICs liability, but this is far less onerous than multiple P11Ds.
The advantage for the employee is that they pay as they go, so should not discover a tax liability when they reach the end of the year. More employees should ultimately have standard tax codes, despite receiving Benefits in Kind.
What do you need to do?
To report Benefits in Kind through the payroll you must register your intention with HMRC before the start of the tax year. If you ask to register mid-tax year, HMRC may allow this but you would still need to produce P11Ds but mark them as ‘payrolled’.
You can register most benefits to go through the payroll, and it is possible to specify individual employees if you do not want their benefits to be processed in this way.
Is there any additional work to do?
Registration is an obvious addition, but once the company has registered that benefit it will continue to be included for payroll until HMRC is notified otherwise. There is no need to re-register the same benefit each tax year.
You also will need to notify your employees. Once you have registered, you should notify them that you will be entering the benefits via the payroll, and what this means for the employee. You also need to provide information after the end of the tax year.
The end of the P11D?
It seems likely that eventually all benefits will be reported via RTI via the payroll. There may still be a need for the P11D(b) but this may well disappear too. It is not completely straightforward to process the benefit through the payroll, but it is far more streamlined than multiple P11Ds.
The P11D will probably go, but not just yet. We are very positive so far about Benefits in Kind and payroll, but you need to make sure you register this tax year if this is something you intend to take advantage of from April ’18.
For more information see here.