Following HMRC’s consultation over the summer, the regulations on the simplification of employee benefits and expenses have been published. This includes:
- The voluntary payrolling framework
- Removing the need to report reimbursed expenses on a form P11D
- Bespoke scale rates
- Removing the £8,500 lower earnings threshold (and therefore P9D returns)
What this means in real terms
From April 2016, employers can choose to add the value of benefits in kind (BiKs) to taxable pay paid through the payroll. This means that P11Ds will not be required at the end of the 2016/17 tax year.
Employers who intend to use this new option from April 2016, or those who have been trialling this under an informal arrangement with HMRC, must register using HMRC’s
PBIK registration service. Registration closes on 4 April 2016 for the 2016/17 tax year. After this date you can still register but will have to wait until the tax year beginning 6 April 2017 to start the process.
For more information or to complete your own registration, please see the HMRC guidance:
Tax your employees’ benefits and expenses through your payroll.
P11D(b) returns (the employer declaration of the amount of Class 1A NIC due) will still have to be made, and must include the total values of all payrolled and non-payrolled benefits.
The £8,500 threshold for taxing certain BiKs is removed from 6 April 2016. This means that from this date employees earning at a rate of less than £8,500 will be taxed on their BiKs in the same way as employees over the £8,500 threshold. Unless you have opted to payroll your BiKs, you will need to notify HMRC of any employees earning at a rate below the former threshold (£8,500). HMRC will need the names, National Insurance Numbers (NINOs), the type of benefit and the taxable amount of each BiK that you make available to each employee. Please let us know if you would like us to action this on your behalf.
From the 2016/17 tax year onwards, you will need to report on P11D any BiKs that are not payrolled.
Expenses exemption to replace dispensations
From 6 April 2016, you will no longer have to pay tax and NICs on qualifying paid or reimbursed expenses payments. This means that where an employee is entitled to claim a fully matching tax deduction you will no longer need to apply for a dispensation, or report those expenses on form P11D. All other non-allowable expenses will still be subject to tax and NICs as they are now.
Employees will still be able to claim tax relief from HMRC in respect of non-reimbursed expenses.
However, the new exemption does not apply to expenses or benefits in kind provided
under a relevant salary sacrifice arrangement. This includes any arrangement where
employees give up the right to receive earnings in return for tax free expenses payments, or where the level of their earnings depends on the amount of any expenses payment.
After 5 April 2016 any expenses payments you pay to employees under these arrangements will need to be paid after deducting tax and NICs.