Employers take note

hmrc-logoA raft of changes have been introduced in payroll and benefits reporting.

£8,500 lower earnings threshold

The £8,500 threshold for taxing benefits-in-kind was abolished from 6 April 2016. Employers will need to report all taxable benefits-in-kind on form P11D, unless they intend to use ‘voluntary payrolling’. Class 1A NIC will be payable on all benefits-in-kind, regardless of the level of an employee’s earnings.

Voluntary ‘payrolling’ benefits

From April 2016 employers may deduct the tax due on benefits-in-kind through payroll rather than disclosure on a P11D. Initially employers will be allowed to payroll four benefits-in-kind:

  • cars
  • car fuel;
  • private medical insurance; and
  • subscriptions, e.g gym membership

Employers need to register with HMRC before the beginning of the tax year to join the new scheme.

P11D Dispensations abolished from April 2016

In the past, employers who paid or reimbursed business expenses to employees, had to report these on form P11D unless the employer had in place a ‘P11D dispensation’ with HMRC . If reimbursed business expenses were included on an employee’s P11D, they had to then claim tax relief from HMRC.

From April 2016, P11D dispensations are abolished and employers do not need to complete form P11D where the employee is entitled to tax relief for the reimbursed business expenses. This means that employers will need to determine the correct tax treatment of the expenses they pay to their employees.  Employers must continue to keep records of amounts paid to employees.

Employers who pay scale rates can either use HMRC published scale rates or for employers to apply to continue to using recently agreed bespoke rates.

Statutory exemption for trivial benefits

From 6 April 2016, trivial benefits costing up £50 per head will be exempt from tax and NIC. If the item costs more than £50, is cash or a cash voucher or is contractual or linked to an employee’s employment performance, the whole benefit is taxable.

Directors of close companies are limited to receiving a total of £300 of trivial benefits tax-free per tax year.

Our tax team led by Holly Bedford-Bell provide specialist advice to shareholders, management and companies. Please do not hesitate to contact us on 01491 579740.