Q & A: Payrolling Benefits and Expenses
What does ‘payrolling Benefits in Kind’ mean?
Since 2016, employers have had the option to make use of HMRC’s ‘Payrolling Benefits in Kind (PBIK)’ service. This voluntary service negates the need for employers to submit a P11D form at the end of each tax year for any employees who receive benefits or expenses. Instead, tax is deducted direct from employees’ monthly pay. This can be far easier for companies to manage and can remove the need for HMRC to reissue tax codes at the end of the tax year.
How can I access the service?
Employers can register for the PBIK service via the HMRC website. This must be done by 6th April 2020 to make use of the service for the 2020-2021 tax year.
It is possible to exclude selected employees from payrolling and continue to use the P11D form to submit their information. However, once the tax year has started you must continue to payroll the benefits for employees you have not excluded until the end of the tax year or until you stop offering the benefit.
If at any time you wish to stop using the PBIK service, you will need to advise HMRC before the start of the following tax year.
Which benefits can be payrolled?
All benefits can be payrolled except employer provided living accommodation and interest free and low interest (beneficial) loans. These still need to be declared via a P11D form.
It’s worth knowing that you will still be required to submit a P11dB form at tax year-end to pay any Class 1A National Insurance owed.
How do I calculate what should be payrolled?
To calculate this, you will need to add the cash equivalent of the benefit as an element of employee’s pay and then tax them through payroll. HMRC will ensure that the value of the benefit is not included in the employee’s tax codes.
Communicating PBIK to employees
Once you have registered to use the PBIK service you are obliged to advise employees in writing. In addition to this, by 1st June, following each tax year end, you will need to provide employees with:
- Details of the benefits you have payrolled;
- The cash equivalent of each benefit you have payrolled;
- The relevant amount you have payrolled for optional remuneration (salary sacrifice);
- Details of any benefits you have not payrolled.
If you would like to know more about HMRC’s PBIK service, speak to your payroll provider or, if you are an Ink Payroll client, your Account Manager will be happy to provide more information.
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