Voluntary Payrolling of Benefits In Kind
At Ceridian, we have expertise in matters relating to PAYE and flexible benefit systems and have offered payrolling solutions for many years. However, payrolling did not remove the employer obligation for the provision of the P11D (to either the employee or HM Revenue & Customs) or Class 1A NICs reported on the P11D (b).
As a result of the Office for Tax Simplification (with Ceridian’s Simon Parsons as a members of the consultative committee), HMRC are moving ahead with changes formerly allow payrolling of benefits. Prior to the start of the 2016/2017 tax year (6th April 2016), employers may register benefits which are to be payrolled and no longer reported on form P11D either in paper or electronic format.
By the use of notional amounts, the periodic benefits values may be presented to Ceridian payroll as: Non-Payable, Taxable, Non-NIable, Non-AEOable, Non-Pensionable and non-QE, Benefit In Kind etc.
Class 1A NICs on BIKs remains reportable through an adjustment on the employers P11D (b) with payment required by the Class 1A payment date in July following the closing of the tax year.
Class 1A liability is not a payroll calculated or reported value – HMRC do not permit it to be! However, Ceridian can optionally facilitate the accumulation of a notional accounting values which is based on 13.8% of the BIK value subject to Class 1A as an optional non-standard facility.
Ceridian have been payrolling BIK for many years for many clients. This new OTS initiative removes the existing requirement for the inclusion of these amount on the P11D report to HMRC.
However, be warned, the new initiative removes prior agreements whereby HMRC accepted lists of benefits payrolled as an alternate to real P11D reporting – these arrangement are cancelled for the 2016/2017 tax year onwards.
Where a Ceridian payroll pay element is appropriately set, then all the related impacts on the calculation of Tax, Class 1 NICs and the reporting of BIK items on the Real Time Information(RTI) Full Payment Submission (FPS) are all appropriately fulfilled.
Employers who want to payroll benefits need to consider:
- Contact Ceridian to ascertain what options are available and any potential associated cost implications
- Do the initial registration with HMRC for selection of this as an option
- When able to (and before 6th April 2016) – register the individual relevant benefits using the HMRC service
- Notify Ceridian of the relevant new pay elements and their settings (i.e. Non-Payable, Taxable, Non-NIable, BIK, Non-AEO, Non-QE and Pensionable etc.
- Provide the benefits amount required by the payroll
HMRC published the following information on the calculation of the benefit for payrolling:
How to payroll benefits and expenses
You collect the tax due on benefits and expenses by adding a notional value to your payroll, rather than reporting them separately on a P11D.
Before making the first main relevant payment to an employee in a tax year you need to calculate the cash equivalent of the benefit. You then need to determine the number of payments to be made to the specified employee in the tax year (weekly, fortnightly, monthly etc.) and divide the cash equivalent by the total number of payments to be made. The resulting amount is the taxable value of benefit which should be added to the payroll each pay cycle as a notional value. Then deduct or repay tax as usual by reference to the employee’s code, even if this is the subject of an objection or appeal.
Further technical guidance will follow after publication of the PAYE regulations.
So can you payroll benefits on the Ceridian payroll – of course you can and always have – payrolling is not new and many clients already use it. What is new is the option to no longer have to report that item on the P11D by registering so with HMRC.
Q: So if we fail to register prior to 6th April 2016 – can we still payroll benefits?
A: The simple answer is yes, what you must also do though is report that benefit on the P11D as not registering with HMRC means that you are not let off the hook for that legal requirement. This must be in the format of a P11D and not an alternate list as those are now removed.
PLEASE NOTE THAT THIS RELATES TO THE P11D SUBMISSION FOR 2017 (the 2016-2017 tax year) AND NOT 2016 (for the 2015/2016 tax year). REGISTRATION BY THE EMPLOYER WITH HMRC MUST TAKE PLACE PRIOR TO 6TH APRIL 2016.