From 6 April 2016, employers can choose to tax benefits in kind through the payroll.
Most benefit in kind are included, the only exclusions are vouchers, living accomodation and interest free / low interest loans.
This does away with the need for companies to prepare forms P11d each year, saving on admin costs and means that the employees tax position is always up to date.
We often see cases where an individual is not aware that thier PAYE code is incorrect.
As a result the PAYE code has not been collecting the correct amount of tax on benefits in kind, resulting in an unexpected tax demand for several £000’s.
When the benefits are payrolled, income tax is paid on the cash equivalent of the benefit provided calculated in accordance with the existing rules. The benefit is then split over the pay periods for the tax year, typically weekly or monthly.
Only the income tax on benefits is collected in this way, if the company is liable to pay class 1A NIC on the benefits this is paid annually in the usual way.
To payroll benefits in kind for 2016/17, the company must register with HMRC by 5 April 2016.
For more information, please contact Lesley Sutton on 01484 550037 or email email@example.com.