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Processing benefits and expenses through your payroll

Jonathan Barrett

There is now a voluntary facility for employers to put benefits and expenses through their payroll without having to submit a form P11D after the end of the tax year. If you intend to do so for the 2017/18 tax year, you must register with HMRC before 5 April 2017.

This can be done through the HMRC online facility. In order use the service you will require your Government Gateway ID and have enrolled for PAYE online. (Agents such as accountants can’t directly access this service on behalf of clients). 

All benefits and expenses going through payroll need to be included in a Full Payment Submission when you report your usual payroll information.

Employers should be aware that certain benefits can’t be put through the payroll as follows:
  • Interest free and low interest loans
  • Employer provided living accommodation
  • Vouchers & credit tokens
Employee benefits
These must be reported on a form P11D even if other benefits are being put through the payroll. HMRC must be informed of which benefits you wish to payroll during the registration process.

Notifying employees
After registration a letter must be provided to each employee detailing which benefits you are putting through the payroll. In addition, before 1 June 2017 a letter must be provided to employees detailing:
  • The benefits that have been put through payroll
  • The cash equivalent of each benefit being put through payroll
  • Details of any benefits not included in the payroll
(These details will be needed by those employees who are required to complete a self-assessment tax return). The employee’s tax code will be updated to remove the benefits in kind that are to be put through payroll.

Class 1A National Insurance
Employers will still be required to work out the class 1A NIC due on the cash equivalent of the benefits (even if they are being put through payroll rather than being reported on form P11D). This should then be reported to HMRC on form P11DB by 6 July 2017.

If you require any further advice on this or any other aspect of payroll or employee benefits please contact us.