Is the P11D Form Dead? New Payrolling BIK Scheme LiveApril 15 2016, 0 Comments
Starting this April, the Government will launch its new payrolling Benefits-In-Kind (BIKs) scheme, which gives employers the option to avoid submitting most of their employee benefit forms (P11Ds) and dealing with P46 car forms.
The new ‘voluntary service’ will allow employers to payroll most of their employee benefits (BIK), meaning that they must deduct the expenses in real time, each month, from the employee’s pay.
The deadline for this is almost upon us and if in fact employers do want to enter into the scheme, they must register with HMRC by the 5th of April 2016 to meet the deadline for the 2016/17 tax year.
Is It Worth It for Employers?
Typically, any type of change in policy is welcomed by businesses however UK employers must be wary in this case. With all of the added complexities by entering into the scheme, it may not save employers any time at all since the principles dictating what is reportable (taxable) haven’t changed.
With no relaxation in what is needed to be reported, companies must still have accurate and compliant expense policies which again stresses the need for proficient accounts to be recorded in your accounting software. This will, as normal, mean that financial controls must be in place, including the data regarding the nature of all reimbursed employee expenses.
If you do not wish to enter into payroll BIKs, then you don’t need to do anything and the running of your company will continue in the same way using the standard P11D forms.
What You Need to Know in Payrolling BIKs?
- If you’re already payrolling some benefits-in-kind through payroll, this must stop on the 5th of April regardless of whether you decide to payroll or not. At the moment, any BIKs processed through payroll are classed as dispensations by HMRC and all of these dispensations must stop on this above date.
- If you chose to payroll BIKs it will last for 12 months and cannot be changed. This will carry on until you notify HMRC in time for the following tax year.
- You can’t payroll beneficial loans, living accommodation, credit cards or vouchers so when you register, you need to decide which benefits to payroll and exclude individuals that this would not apply to.
- You will need to inform your employees individually if you decide to change from using P11Ds to payrolling as it will change the amount of tax deducted on their pay slips. You’ll need to explain how it works and what It means for them.
- It’s highly possible that certain members of your workforce may approach you not to payroll their BIKs through payroll.
- Individuals may see that their tax code is still reduced because they already owe tax on benefits from the previous tax year. It will also show the tax for their benefits in real time (through the payroll) during 2016/17.
- This is an important point to bare in mind. Even though you have opted to payroll your BIKs, you could potentially still need to deal with P11Ds for any benefits you haven’t payrolled or for the individuals that you have excluded from the scheme.
- If you have a payroll department you will need to warn them in advance as they will need to set up the new payment details and data. If during the scheme there is a change or termination to the benefit provided to a person, the system will need to be suitably amended.
- June 1st will now be an important date. If you don’t detail the items payrolled individually, you will as a results need to provide an annual statement to the employees concerned. Also, it’s the new date by which any ‘make good’ payments need to have been made to the employer, for example private fuel, otherwise, it will need to go through Payroll on the next available pay date.
- You will still need to complete a P11D(b) in respect of Class1A employer NIC’s on these benefits regardless of these being payrolled, and pay over this amount to HMRC by the 22nd July each year.
- P11Ds regarding accounts for 2015/16 will still be required by the 6th of July 2016 as normal.
- You will need to provide employees with a description of the benefits that have been accounted for in the tax year, for example car fuel, the cash equivalent of each benefit that has been identified and taxed in the tax year.
You can see from the pointers above that there is a lot to think about. The scheme will add tasks to your payrolling and HR processes. Whilst the BIKs seemingly saves you time, this extra time could be taken up with the admin duties and employee queries that this new system brings.
You will need to subjectively assess what will work best for your company and step up. There may also be some P11D forms that you will need to fill out so it may not remove the task all together even if it is a lesser amount than previously.
If you require any more information or guidance, you can visit the HMRC website.