If you pay yourself and/or provide your employees with benefits ie. car for private use, medical insurance ect. or if you are thinking about providing benefits from April 2020, you now have an option to put these benefits through your payroll. As a result tax liabilities (employer NIC and employee tax and NI) are deducted on a monthly basis rather than being due in one big lump sum.
All benefits provided count as employment income of the employee for whom (or for whose family or household) they're provided.
Taxable Benefits and Facilities include:
the provision of living or other accommodation, including lights, heat, rates and domestic or other services
the use of any asset provided by the employer or another person acting on the employer's behalf, for example, the use of a motorcycle, an aircraft or yacht,
the provision of fuel for private motoring in a provided car
gifts of assets to the employee, or the sale to the employee of assets at less than their market value (this applies not only to assets such as a car or a house, but also to goods such as clothes, TV sets, wines or groceries)
any non-exempt expenses or liabilities incurred by the employee and paid direct by the employer, for example, hotel or restaurant bills
Income Tax not deducted from employment income paid to a director, but paid to HMRC by the employer and not reimbursed by the director
scholarships awarded to students by reason of their parents' employment
hotel accommodation and restaurant facilities arranged by the employer
holidays and childcare
shooting, fishing and other sporting facilities
work carried out at the employee's residence
Benefits to which special taxing rules may apply:
cars and vans available for private use
certain arrangements in connection with share incentive schemes
tax not deducted from employment income paid to directors
certain arrangements for providing employment income through third parties
This process of payrolling benefits, which is entirely voluntary, allows you as an employer to add the cash equivalent of the benefits as a nominal adjustment to the employee’s taxable pay processed through PAYE. Once the value of the benefit is included in their taxable pay, the tax for the employee is calculated, collected and paid in real time throughout the tax year. To ‘payroll’ a benefit the ‘cash equivalent’ of that benefit should be calculated and then split across the tax year as applicable. Tax is then charged on each payrolled benefit and is reported in the FPS for that period. Once registered with this service, you can select which groups of benefits you want to payroll – you do not have to payroll them all. HMRC’s systems will automatically identify all employees who have the benefits you have chosen to payroll in their tax code. HMRC will remove the benefit from their tax code (to ensure that the tax is not collected twice) and a new code will be issued. It is the employer’s responsibility to inform their employees that their codes will change. We can do this for you. If you opt to register for payrolling benefits, you will not have to prepare a P11D form for individual staff at the end of the year. However, you will need to prepare a P11D(b) in order to pay your Employers Class A1 National Insurance on relevant benefits.
The following benefits, even though they may be taxable, cannot be payrolled and this means that you would have to submit a P11D form including these benefits if you were to provide them:
Interest-free or low interest loans subject to the beneficial loan interest charge
Applications to payroll benefits have to be made on or before the start of the tax year that you want to start using this system. The deadline to apply to payroll benefits this year in 5th April 2020. - We can do this for you if you let us know that you want to register. In order to find out about benefits that are non-taxable and so will not need including in payrolling benefits, following the link below to our blog post on non-taxable benefits. https://www.mycloud-accounts.co.uk/post/non-taxable-benefits