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Are P11D benefits and expenses forms all but redundant?

Graham Clow, Associate Director in our Payroll team, takes a look at the P11D expenses and benefits forms and shares whether HMRC will likely remove the P11D process altogether.

In April 2016, HMRC introduced a service whereby you can payroll certain benefits and expenses instead of completing the P11D expenses and benefits forms. Employers are still required to pay Class1a National Insurance Contributions (NIC) on the benefits by using the P11Db form (total summary of taxable items and Class1a NIC to pay) or a separate remittance of the total amount with a backup report. The ‘pay-rolled’ item then becomes taxable, at source via payroll, negating the need to produce a time-consuming P11D form for each individual in question.

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Graham Clow

+44 (0) 207 556 1430
clowg@buzzacott.co.uk
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In April 2016, HMRC introduced a service whereby you can payroll certain benefits and expenses instead of completing the P11D expenses and benefits forms. Employers are still required to pay Class1a National Insurance Contributions (NIC) on the benefits by using the P11Db form (total summary of taxable items and Class1a NIC to pay) or a separate remittance of the total amount with a backup report. The ‘pay-rolled’ item then becomes taxable, at source via payroll, negating the need to produce a time-consuming P11D form for each individual in question.

Will HMRC remove the P11D process altogether?

Will HMRC remove the P11D process altogether?

With an alternative service in place and the P11D forms all but redundant, could we see HMRC eventually remove the P11D process altogether? The subject has been talked about at HMRC policy team level for some years now. On the surface, this would appear to be a sensible reduction in time and administration costs for all concerned but the question arises on how to treat the Class1a NIC element if this scenario was to unfold?

Most payroll practitioners are of the opinion that HMRC will someday remove Class1a NIC under P11Db altogether and re-categorise the benefit as Class 1 NIC via payroll. This will then render the benefit, not only subject to NIC on the employer (as under the old P11D regime) but crucially subject to NIC on the employee. The employee will need to be mindful of the potential increase in NIC on this additional item(s) although it would be hoped that HMRC would mitigate this additional liability in some way, by possibly manipulating the thresholds and percentages for Class 1 NIC.

I think it is a case of ‘watch this space’ and Buzzacott, with its direct association with all chartered payroll bodies and their subsequent links to government policy forming teams, will be keeping a close eye on any developments.

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