The Government has unveiled a new approach to the payment of Benefits in Kind (BIK), allowing tax agents to manage payroll BIK for their clients for the first time.
This change is expected to lessen administrative burdens on employers and enable agents to offer better support to their clients.
When an employer offers a taxable benefit, such as a company car, the taxable value of the benefit must be assessed. The majority of BIK types have established methods for determining the value, with tax being paid on that amount.
Currently, employers must report employee taxable expenses or benefits to HM Revenue & Customs (HMRC) directly, either through payroll or at the end of the tax year.
They must also disclose the Class 1A National Insurance (NI) amount owed on all provided expenses and benefits and pay any outstanding NI.
The March Budget included the Chancellor’s announcement to streamline the tax system for taxpayers and their agents.
New IT systems will be implemented, allowing tax agents to manage payroll BIKs on behalf of employers. Agents will be able to report expenses related to company cars, health insurance, travel and entertainment, and childcare.
From April 2023, HMRC will require the minority of digitally capable employers still using paper forms for reporting employee benefits and expenses to switch to online forms.
Following this change, P6 and P9 coding notices will be issued exclusively through digital methods.
If all expenses and benefits are payrolled, there is no need to report expenses and benefits for each employee at the end of the tax year.
Employers who negligently or intentionally provide inaccurate information in a tax return, resulting in underpayment of tax or over-claiming tax reliefs, may face penalties.
