Payrolling of benefits


Written by: Mark Abbs

Frequently asked questions.

What is the issue?
From April 2016 HMRC has introduced a voluntary framework to allow employers to payroll most BIK. Where benefits are payrolled under these arrangements, the benefits no longer need to be reported on the form P11D. However, the class 1A NIC still needs to be accounted via the P11D process in the normal manner.

What benefits can be payrolled?
Most BIKs can be payrolled. These include employer provided medical Insurance benefits and company cars. There are some benefits that cannot be payrolled and include:
  • Credit cards and vouchers (can be payrolled from April 2017)
  • Living accommodation
  • Interest free and low interest (beneficial loans)

What are the benefits of payrolling?
The main advantages of payrolling employee benefits are:
  • The employer does not need to also prepare form P11Ds for those benefits
  • Reduction on employer administration
  • Potential to help reduce some issues with employee coding of benefits

Are there any disadvantages?
  • You will still need to complete and submit the form P11D(b) to account for the class 1A NIC on the benefits that have been payrolled
  • In the first year of payrolling, employees may have to pay tax for two lots of benefits in just one year. This could impact on their cashflow. For example, if you introduce payrolling of benefits for the year 2017-18, employees will pay tax on 2016-17 benefits, reported on the 2016-17 P11D, via their tax code and also pay tax on the current year (2017-18) benefits that have been payrolled
  • The cost of training the payroll staff and any upgrades to the payroll software also need to be considered

What do I need to do?
Employers that want to payroll employee benefits under this voluntary arrangement must register online by 5 April prior to the beginning of the tax year, using the HMRC online Payrolling Benefits in Kind (“PBIK”) service.

If the employer is not registered they can still payroll the benefits but will need to report on the form P11D as well, indicating the benefit has been payrolled.