HMRC has issued two sets of draft regulations to deal with two awkward wrinkles in the PAYE rules for reporting company car data and concerning benefits provided via an OpRA.
I have discussed these two issues on AccountingWEB in Tax law needs ironing out and in my recent article on the Employer Bulletin issue 68. The draft regulations are open for comments, but there is a ‘blink and you’ll miss it’ deadline of just two weeks, as responses must be provided by 28 November 2017. To respond to this consultation send your comments to: [email protected].
In April 2016, when the payrolling of company car benefits was introduced, HMRC required employers to only include the cash equivalent value of the car provided within taxable pay. The separate ‘payrolled benefits’ field in the FPS is there to allow the DWP to exclude the amount from the employee’s earnings for Universal Credit.
However, HMRC had forgotten that HM Treasury needs the other information reported on the form P11D (the vehicle’s make, model and fuel), to inform future company car tax policy decisions by indicating buying trends. Whilst additional numerous fields were included in the FPS for 2017/18, HMRC was unable to tell employers and software developers the rules about how to populate them, so the completion of those extra data fields had to be voluntary for this tax year.
This meant HM Treasury lost a second year of data (ie 2016/17 and 2017/18). We had been told that these extra fields in the FPS would be mandatory from April 2018.
In fact, HMRC was incorrectly telling agents in Talking Points webinars over the summer that it would be mandatory to payroll cars from 6 April 2018. This misinformation has been replicated in the explanatory memorandum to the draft regulations which says:
“From April 2018 HMRC are introducing a requirement for employers to report car and car fuel data where they provide cars as Benefits in Kind to their employees.”
What they should have said was these fields would be mandatory in the FPS if the employer voluntarily chooses to payroll cars. The draft regulations that amend the PAYE regulations to accommodate the capturing of those additional data items are here.
Where an employer has registered to payroll benefits in kind that are provided via an Optional Remuneration Arrangement (OpRA) – aka salary sacrifice – the PAYE regulations don’t make it clear that the modified cash equivalent (MCE) is the appropriate value that must be payrolled. This means that employers who have payrolled OpRA provided benefits for 2017/18 are technically reporting outside the law as there is no legislative support for the value they have included in taxable pay.
HMRC announced in July 2017 that they would not require P11Ds for 2017/18 in respect of these benefits, as long as the employer has correctly payrolled the modified cash equivalent.
The explanatory memorandum to the draft regulations does promise more guidance will be provided, particularly on the OpRA reporting. I hope this guidance is provided soon, as the P11D working sheets to support car reporting for 2017/18 that were published this week have already provoked a number of queries. I'll cover that in another article!
About Kate Upcraft
Kate is a technical writer, editor and lecturer on all aspects of employing people - primarily payroll and HR matters.