22nd February 2016
From this April, the start of the tax year 2016 to 2017, you can elect to account for the tax on the benefits you provide to your employees through PAYE every payday. ‘Payrolling’ was one of IRIS FMP Payroll Services ‘Top Ten issues for payroll in 2016’.
Registering with HMRC will allow you to payroll tax on benefits without having to submit P11D information after the end of the tax year.
However to benefit from this this tax year you must register before 6 April. HMRC can then amend your employees’ tax codes before the start of the tax year to remove any benefits previously included.
Our recommendation is that you register sooner rather than later to avoid any issues with the HMRC. Miss the April deadline and you can’t register for this next tax year. In later years employers changing over to payrolling must register well before the start of the tax year. However, once you’ve registered payrolling is continuous unless you decide to deregister.
What do I tell my employees?
Once registered you must inform your employees what payrolling will mean to them. You can do this via your payslips or a separate note but whatever you do, you must make it clear to your employees what benefits have been subject to PAYE tax. You should also advise them of the value of each benefit you have collected and reported tax on so that they can make any necessary declarations on their self- Assessment Tax return. Any employees with payrolled benefits will be sent an amended tax code.
You must still submit a P11D to HMRC for any benefits that you don’t payroll and provide the employee with these details as well.
What can I payroll?
More or less everything as long as you advise the HMRC which benefits you want to payroll. There are some excluded benefits; vouchers and credit tokens; employer provided living accommodation; interest free and low interest (beneficial) loans and these should still be reported on a P11D if applicable
You must still report these excluded benefits on a P11D, even if you are payrolling other benefits for the same employee(s).
Our advice. Register sooner rather than later.