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HMRC Encourages more Employers to Payroll Benefits in Kind

HMRC are encouraging more employers to payroll employee benefits in kind rather than declaring benefits on the end of year P11D. They have included guidance on registering to use the scheme in their latest employer bulletin.

payroll benefits in kind

If employers haven’t already done so they should register online now or before 5 April 2022 to payroll employee benefits for the tax year.

If the benefit starts during the year then a P11D will still be required until the following April, then the benefit can be applied to the payroll.

The advantages of payrolling benefits in kind are:

  • employers no longer need to submit P11D and P46(Car) forms to HMRC
  • simpler PAYE codes mean HR teams receive fewer queries from employees regarding tax
  • tax deductions in monthly payroll will be more accurate
  • tax codes for individuals should change less frequently
  • fewer forms for employers to complete at year-end
  • the employee pays the tax on the benefit in real time, rather than the following tax year.

Managing your payroll benefits in kind

If you are not yet in a position to move to payrolling you can still move away from legacy paper P11D forms by submitting them online. You can submit them in one click without worrying about posting them to HMRC. It is also a useful first step towards payrolling of benefits in kind and bringing your payrolling processes into the digital age.

HMRC may eventually expect all benefits to be payrolled, but this has currently not been confirmed.

We should point out that payrolling takes care of the tax element of the benefit. To account for Class 1A NICs, you will still need to complete a P11d(b).

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