When can you start payrolling benefits in kind before the start of the next tax year (in-year payrolling)?

The payrolling benefits and expenses online service tool allows employers to notify HMRC that they intend to payroll the income tax due on certain benefits they provide to their employees. The guidance published by HMRC provides step by step advice on how employers can use the registration tool and sets out employers’ obligations when they start payrolling benefits.

HMRC has identified some changes to the current guidance and processes due to customer feedback on the tool that will allow employers to begin payrolling during the tax year the benefit is provided rather than from the following tax year.

These circumstances are limited to ensure that an employee is not taxed twice on their benefit through an incorrect tax code change.  Employers can only begin payrolling in-year when:

1. they are a new employer, or
2. the employer is providing benefits to their employees for the first time, or
3. the employee has just joined the organisation and have not been in receipt of a benefit from the payrolling employer, including from a previous employment and,
4. the employer and employee is willing to “true” up the benefit, where it has been provided before the employer has started payrolling, before the end of the relevant tax year.

These changes mean that employers will not need to contact HMRC outside of the registration service deadline to start “informally” payrolling. A P11D will not be due for that year.  However, the employer will still need to follow the existing processes, including informing their employees which benefits they are payrolling and they will still need to register using the payrolling registration tool.

How will these changes be communicated?

These changes will be notified via existing employer engagement groups and channels such as the HMRC Employer Bulletin and agents update. Further guidance will also be incorporated into the existing webinar on “how to payroll benefits”.

Stephanie Wilson
stephanie.wilson@bdo.co.uk

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