Payrolling Benefits – Act now!

As we approach the end of the 2020/21 tax year, we will shortly be in the P11D reporting window for employee benefits. While completing P11Ds may be something that you have done for as far as you can remember, it may be worth considering moving to the Payrolling Benefits scheme from April 2021 to streamline and simplify your employee benefit reporting.

What is the Payrolling Benefits scheme?

This scheme provides employers with the option to process employee benefits through payroll on a real time basis rather than submitting P11D forms in July after the end of the tax year. Employers must still report the values on the Company declaration form P11D(b) though by 6th July each year to calculate and pay the Class 1A National Insurance due as this is not payable via payroll on benefit values.

Benefits of the Payrolling Benefits scheme

For employers who have gone ahead with implementing the scheme and have been operating it for a number of years now, they have expressed that the main benefit has been the reduction in annual administration time and costs surrounding employee benefits as P11Ds have to be submitted only for benefits left out of payroll.

Employees also see benefits from the scheme as their tax due on benefits provided to them is collected on a monthly basis along with their normal PAYE which reduces confusion with tax code adjustments which occur via the normal P11D reporting, as well as minimising the chance of underpayments of tax.

If you are interested in starting to payroll employee benefits it’s not too late to register to do so for the 2021/22 tax year. Registration is open until 5th April 2021 and can be completed using your online HMRC dashboard. In recent years employers who have been unable to complete formal registration via their online dashboard have been able to agree an informal arrangement with HMRC, however HMRC confirmed last month that they will no longer be accepting informal registrations from April 2021 and so to ensure P11Ds are not required for 2021/22, formal registration must be completed before 5th April.

If you require any assistance or would like any further information on payrolling benefits, please do not hesitate to contact Megan McDonald  or your usual AAB contact.

Find out more about AAB’s Payroll & Employment Taxes team here