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The Move to Payrolling Benefits – Have You Registered Yet?

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14 March 2019

The Move to Payrolling Benefits – Have You Registered Yet?

By Shona Duncan, senior tax manager

If you are an employer, you are probably all too familiar with the red tape that comes with reporting taxes. Submitting benefits is one such aspect that involves a dense amount of paperwork every year, but the good news is that it no longer has to be that way.  

HMRC enhanced the process of payrolling benefits in April 2016 to make it less bureaucratic. Since then, employers have been able to report employee benefits monthly in real time, online, through a new system known as Payrolling Benefits in Kind (PBIK) - a move away from the traditional way of reporting through P11D at the end of each tax year.

The advantages of Payrolling Benefits in Kind (PBIK)

Although PBIK is completely optional, it is an effective measure specifically introduced to simplify the administration behind submitting benefits in kind. This is a notable advantage which is more time and cost effective when compared to submitting P11D forms at the end of each tax year.

Once registered under this scheme, all you will need to submit is P11D(b) form for the Class 1A National Insurance contributions (NICs) on the expenses and benefits you report on a monthly basis, online in real time.

The PBIK scheme also has advantages for your employees; the taxable amount based on their benefits will be deducted every month with their PAYE. This helps make the process of tax code adjustments much more straightforward. Keeping a monthly tab of the tax due on benefits is also a more accurate way of reporting benefits in kind, thereby reducing the risks of making errors, such as tax underpayments.

Transitioning to the monthly reporting process

If you’re considering making the move to the monthly process of reporting BIK, you’re still in time – applications are open until 5 April 2019, before the end of the tax year, via HMRC’s online gateway. Registering before the deadline will make you eligible for the online service for the upcoming tax year.

If you miss the deadline, you will not be able to register for the PBIK scheme for the next tax year, as HMRC would not be able to apply the changes within the same tax year. In this case, you will need to process benefits using P11D for a further 12 months.

Employers should also take into account the exceptions. Some benefits such as low interest or interest free loans, vouchers and living accommodation cannot be processed through the PBIK scheme.

If you’re looking to start payrolling your benefits but you’d like to have more information, our team can provide you with further support, whether it’s helping you to get set up with HMRC or to examine the benefits of outsourcing payroll.

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