Changes from 6 April
Benefits in kind: what you need to know
Put simply, Benefits in Kind (BiK) are benefits that employees receive that do not come in the form of cash.
Often referred to as ‘perks’, they include the likes of company cars, travel expenses and private medical insurance. The recent introduction of the Payrolling Benefits in Kind online service is one that has come with much confusion.
Here is a simplified guide to the change in PAYE legislation.
- In order to start payrolling or continue payrolling BiKs in the 2016 to 2017 tax year, employers must have registered with HMRC’s online Payrolling Benefits in Kind service before 6 April 2016. This is accessed through the employers Government Gateway account. Employers, who intend to payroll benefits and expenses but have not registered, must now wait and register before the 2017 to 2018 tax year begins as HMRC need to amend employees’ tax codes in advance to remove any BiKs previously included.
- This is a completely voluntary service; employers are not required by law to introduce this service, but where an employer was previously taxing their benefits through the payroll under an informal arrangement they are required to register them with HM Revenue and Customs (HMRC). If an employer chooses to introduce this service, they will no longer have to report benefits and expenses on a P11D. It is also important to note that HMRC no longer accept informal reports of employee benefits which are often referred to as lists.
- Anyone who currently uses, or intends to use this service, must be aware that there are some benefits they won’t be able to payroll during the 2016/17 tax year, these include:
- Living accommodation
- Non-cash vouchers and credit tokens
- Interest free and low interest (beneficial) loans
If the above benefits are being put through a company’s payroll, they may continue to do so, however are required to report them on a P11D as well. It was announced in the 2016 Budget that non-cash vouchers and credit tokens will be included within the payrolling of benefits service with effect from 6th April 2017.
- The system is designed to provide the opportunity to remove or reduce employer’s obligations to send returns to HMRC. The taxing of BiKs also makes it easier for employees to understand and be more efficient at collecting the right amount of tax in real time. Another advantage to this system is that employers can choose to payroll company car BiKs, meaning they no longer have to submit a P46 car form when they provide an employee with a car.
- After registering to payroll BiKs, you must continue to do so until the end of the tax year unless any of the following applies:
- There is insufficient income to cover the tax on the BiK.
- If you stop providing BiK to your employee
- You make a mistake in registering and don’t realise until after the start of the tax year. Also note, your registration is continuous, you do not have to inform HMRC that you want to payroll BiKs in the next tax year. You can however choose to deregister from payrolling BiKs, if you decide to stop before the start of a new tax year, and you can deregister via the online payrolling BiK service.
For a more in-depth look at Payrolling Benefits in Kind, please see the following link- https://www.activpayroll.com/news-articles/payrolling-of-benefits-in-kind-bik