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Changes to Tax on Benefits in Kind 

The changes to the tax on benefits in kind are now live.  This article explains the changes and how they affect your business.

Why is everything changing?

These changes were recommended by the Office of Tax Simplification (OTS)

The proposal was to simply the preparation of P11d forms.

The changes became law as part of the 2016 Finance Act and will apply from 6 April 2016.

No changes for P11Ds for 2015-16 – it is business as usual

The old rules apply to 2015-16, P11Ds for directors and employees earning over £8,500

2016–17 onwards – what has changed?

  • For 2016–17 onwards, employers may choose to payroll most benefits-in-kind rather than reporting their provision to HMRC after the year-end. You will have needed to register before 6 April 2016 as HMRC cannot process changes within a tax year.
  • You need to register before 6 April 2017 to payroll benefits for 2017-18
  • Payrolling is available for all benefits in kind with the exception of :
    • vouchers and credit tokens, (can be payrolled from April 2017)
    • employer-provided living accommodation
    • interest-free and low-interest loans

How do you payroll a benefit?

Once registered, to payroll a benefit,  an employer treats the value of the benefit as extra pay.

The cash equivalent of the benefit is divided by the pay frequency, say monthly,  and PAYE is worked out on the total pay and benefits in the normal way.

Payrolled benefits are not subject to employees national insurance

Payrolled benefits are not included on P11Ds

Great news simplification of benefits from 2016-17

The changes are:

  • The £8,500 threshold is abolished benefits in kind apply to everyone.
  • Form P9D becomes redundant
  • Dispensations no longer apply but a new exemption means that reimbursed expenses no longer need to be reported on P11ds
  • Trivial benefits in kind provided to employees of up to £50 a year can be ignored and not reported
  • Benefits in kind of up to £300 can be paid to Directors of small companies.

This means that for many of our clients we will not need to complete P11Ds or 2016/17.  For many clients we include the preparation of your personal tax return as a taxable benefit.  We will not need to report this benefit in future years unless your tax return is very complex.

Andy Scott

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