In the new competitive employment market, more employers are using staff benefits as a way to attract and retain the best talent..
A Benefit in Kind (BiK) is a non-cash benefit that you provide to your employee.
In previous years, these benefits were reported using P11D forms that were sent annually to the HMRC by the 6th of July. The taxation due on these amounts was taken into consideration using the employees tax code.
What is a P11D and P11D(b):
A P11D is a document that employers need to download every year from the HMRC website. Employers are responsible for detailing the employee cash equivalent amount of any benefits. Some of the most popular benefits to be reported on P11D’s were medical insurance, dental plans, company cars, and professional memberships (note that not all memberships are NICable – The HMRC publishes a list of memberships every year, so it is important to check).
On receipt of the completed P11Ds, the HMRC will then adjust the employees’ tax codes to ensure collection of any taxation due on their benefits.
The P11D(b) is the employer’s P11D report that totals the amount of all employee benefits and the sum of Class 1A National Insurance due.
In 2016 HMRC introduced the option to payroll employee benefits and there are plenty of advantages to this, such as:
- All benefits are reported in real-time and employees pay any tax in real-time which means no mid-year tax code changes for employees.
- When employees leave, they don’t have to wait months in order to pay the tax over from previous employment.
- It means that P11D’s do not have to be sent to HMRC, only the employer’s P11D(b) to pay over the employer Class 1A NIC
- Payrolling company cars can be one of the biggest advantages, as if an employee’s car changes mid-year then this can be done straight away on the payroll system instead of having to report the changes to HMRC on their forms. It also means that employees continue to pay the correct taxation for amended cars in real-time, instead of having the changes applied in tax codes in the following years.
How do you payroll benefits?
Employers need to apply to payroll benefits with HMRC before the start of a new tax year, this is usually through your online tax account. Employers must start payrolling benefits from the 6th of April.
You can learn more about employee benefits via the HMRC link above or, alternatively, ask advo’s dedicated employee benefits & payroll teams. Our friendly employee benefits team can advise your company on employee benefits that are right for your business, and our payroll team is able to ensure that you process any benefits compliantly. Get in touch today! And for further information, be sure to check out our news page for related reading.