Payrolling & P11D issues: an overview
Currently if an employer wishes to provide what is deemed a Benefit In Kind (BIK) to an employee, there are normally tax and/or National Insurance (NI) implications, and the liabilities are reported on the form P11D or P9D annually, explains the CIPP's Diana Bruce.
HMRC then marry the P11D information to data supplied by employees via their self-assessment tax returns and or the employer end of year information and calculate the tax due and adjust the individual’s tax code accordingly. There is also a Class 1A NI liability for the employer on some BIKs which are reported on form P11D (b) annually.
In 2007 the CIPP lobbied for a change in this process, along with members of the Admin Burdens Advisory Board (ABAB); a consultation forum set up to challenge HMRC regulations and burdens. The proposal, which came about from a HM Treasury’s initiative of aligning PAYE and NICs, was to replace the reporting structure with BIKs being taxed and NI applied at source, otherwise known as “payrolling”.
Research conducted by the CIPP and ABAB found that opinion fell into three areas regarding BIKs reporting, namely: