Goodbye P11D? - New Payrolling Benefits System from 6 April 2016
For many years it has been the employer’s duty to report employees’ benefits in kind by the submission of a P11D by the 6th July following the end of the tax year that is 5th April.
If an employee was granted a benefit, for example private medical care during the year, then the benefit would be reported by the following 6th July but this will result in the employee having a tax underpayment as the tax code can only be adjusted when HMRC receives the P11D.
As from 6th April 2016 benefits in kind can be taxed by way of payrolling benefits so the employee pays the tax when the benefit is made available.
For example an employee is granted private medical care. The employer works out 1/12th of the benefit then simply adds the benefit to the employee’s monthly gross wage. The net pay will of course have to be adjusted to take into account the net value of the benefit.
The main advantage being that the employee pays the tax due immediately, so there will be no need to submit a P11D.
In order to use the system employers must register with HMRC before 5th April 2016 if they wish to use the system during 2016/17.
If you require any further information regarding payrolling benefits, please contact our Payroll Partner, Graeme Sheridan on the details below:
direct dial: 01942 292506