We look at the numerous changes in recent years that employers need to take into account to be correct in their year-end payroll reporting. These include time limits for making good on benefits and the simplification to the PAYE settlement agreement process.
While you may be familiar with the P11d and P11d(b) Expenses and Benefits forms, these changes may add unexpected considerations to the reporting season for the 2018/19 tax year. The forms are due by 6 July 2019, so get in touch now and we can help you to determine your reporting obligations. Going forward, we can ensure your process is streamlined for future years based on these changes.
We examine relevant changes for year end payroll reporting from 2016 onwards:
Time limits for making good
New guidance applies to making good for benefits (other than beneficial loans) that are not already reported in the payroll through PAYE under a voluntary payrolling arrangement. The employee can make good the benefit and reduce the value of benefit for tax and NICs. In order for the taxable benefit to be reduced the employee has to make good by 6 July following the end of the tax year in which the benefit was provided. See Resources below for more information.
PAYE settlement agreements – auto renewal (2018)
From 6 April 2018, the PAYE Settlement Agreement (PSA) process has been simplified. A PSA allows employers to make one annual payment to cover all the tax and National Insurance due on minor, irregular or impracticable expenses or benefits provided for the employees. The process has been simplified through removing the requirement on employers to renew or agree their PSA annually, and providing for an ‘enduring agreement’. If you had a PSA in place for tax year 2017/18 then this will continue to apply for future years. If you do not currently have a PSA in place then get in touch as it may be still be possible to agree a PSA with HMRC.
Payrolled expenses and benefits – voluntary reporting avoiding P11D (2016)
Employers were able to register for a new online voluntary Payrolling Benefits in Kind (PBIK) service from April 2016. The service enables certain benefits in kind to be reported via the payroll only with no P11D reporting requirement. See Resources below for more.
Salary sacrifice and Optional Remuneration Arrangements (2017)
From 6 April 2017, the Income Tax and NICs advantages where benefits in kind are provided through salary sacrifice arrangements (described in the legislation as ‘optional remuneration arrangements’) are largely withdrawn. For most benefits in kind which were subject to either a full exemption or a limited exemption, the exemption does not apply if the benefit is provided in conjunction with a salary sacrifice arrangement. If you have not reviewed your reporting obligations in this area, then now is a good time to revisit to ensure you are reporting correctly.
Abolition of dispensations (2016)
From 6 April 2016 an exemption for paid or reimbursed expenses replaced dispensations and existing dispensations will no longer apply. However, expenses that are tax deductible by employees will be covered by a new exemption. This exemption would cover expenses that are wholly, exclusively and necessarily incurred in the performance of the duties of the employment and therefore fully deductible. Where an expense is fully deductible for income tax purposes, there is no requirement for an employer to report expenses and benefits on which no tax is ultimately payable. To read more on this, see Resources below.
If you need help getting your year-end payroll reporting process up to date, contact our employment taxes team on +44(0)203 051 5711 or email us.