FINANCE
Payrolling benefits : how should employers prepare for mandatory reporting ?
By RICK SCHOFIELD , TAX PARTNER , AZETS , Rick . schofield @ azets . co . uk
In January 2024 , HMRC published its plans to mandate the reporting of employee benefits in kind through payroll Real Time Information ( RTI ) reporting . While many of the finer details are to be published , some additional details were announced in the Autumn Budget . This included confirmation that the implementation date remains set for April 2026 , which means employers who provide taxable benefits to their employees and directors have little over a year to prepare for the change .
Payrolling Benefits in Kind ( PBIK ) has existed on a voluntary basis since April 2016 and has enabled the reporting of most employee benefits through payroll RTI . Employer-provided living accommodation and beneficial loans are currently excluded from voluntary payrolling and will continue to be exempt from the mandatory payroll reporting in April 2026 , but it will be possible to do so on a voluntary basis from this date . Employers who have taken the opportunity to voluntarily payroll benefits have already reduced the annual administrative burden associated with reporting employee benefits through the P11D regime .
Employers who provide employees and directors with reportable benefits and do not already report these under the voluntary payrolling of benefits could consider doing so before the mandatory regime commences .
There is still time to register with HMRC to payroll benefits for the forthcoming 2025 / 26 tax year - the final opportunity before mandatory PBIK is introduced . The deadline to register for 2025 / 26 is 5 April 2025 , but we recommend registering as soon as possible . Electing to voluntary PBIK now provides employers with a ‘ safety net ’ as any items that are missed or under-reported during the year can still be reported on a P11D at the end of the year . This provides a great opportunity for employers to prepare for the mandatory reporting requirements – a dress rehearsal of sorts .
What are the key issues to consider ?
Communication Employers should liaise with benefit providers and payroll departments or providers to ensure that there is a plan in place to correctly identify any taxable benefits and the reportable values in a timely manner . Timetables for the provision of information should be agreed between all parties .
Review management information Review existing management information to ensure it is accurate , well-maintained data that can be relied upon throughout the year to correctly identify the benefits provided and quantify the value on a weekly or monthly basis .
Consider registering for voluntary PBIKs for 2025 / 26 Employers who wish to voluntarily payroll benefits in 2025 / 26 will need to register their intention with HMRC before 5 April 2025 . Employers will need to confirm the benefits they wish to payroll and detail any employees or directors who they wish to exclude from PBIK . There is also a requirement to communicate the change to payrolling benefits to employees .
Employee impact Employees will pay the tax due on benefits in real time via payroll rather than the retrospective adjustments associated with
P11D reporting . This improved visibility over their benefits and tax position allows for early identification of errors . However , the payrolling of benefits represents a significant change which may cause initial confusion for employees who are used to benefits being reported annually or being visible on their payslip . In addition to the written communications required as part of voluntary payrolling , employers could consider providing additional awareness and support sessions .
PAYE risk Reporting and collecting the tax due on benefits via payroll RTI requires the employer to report in real time , reacting quickly to changes in the benefits provided , their cost or movement of employees . If employers fail to withhold the correct amount of tax from employees , they could find themselves exposed to additional liabilities , interest and penalties being sought from them by HMRC .
We are here to help If you have any questions about Payrolling Benefits in Kind , please get in touch .
Local Offices : Ashford : 01233 629 255 Canterbury : 01227 454 861 Maidstone : 01622 690 666 Orpington : 01689 827 505 Sandwich : 01304 249 997
www . azets . co . uk
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