HMRC concession fixes OpRA payrolling issue

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Kate Upcraft has new information about the problems employers face when OpRA is combined with payrolling.

Payroll problem

In June I told you about a legislative wrinkle that needs ironing out for OpRA (optional remuneration arrangement). That gem had emerged during a HMRC webinar for agents on employee expenses and benefits. The presenter simply stated that benefits provided via an OpRA could not be payrolled from 6 April 2017, even if the employer was registered to do so, and the benefits had been payrolled for the prior year.

Research uncovered that this was due to defects in the legislation that introduced payrolling. The law does not refer to the appropriate calculation, introduced from 6 April 2017, for some benefits and some individuals who receive benefits in kind from their employer via Type A or Type B OpRAs.

Types of OpRA

The new 2017/18 rules on optional remuneration arrangements are now incorporated into HMRC’s Employment Income Manual.

There are two types of OpRA:

  • type A arrangements are what employers have regarded as typical salary sacrifices, where an employee gives up cash earnings in exchange for a benefit in kind.
  • type B arrangements are where an employee chooses a benefit rather than a cash allowance, such as a car or living accommodation.

There still appears to be limited understanding amongst employers and agents that the definition of Type B arrangements brought many arrangements for providing benefits into the scope of the new regulations.

Concession applied

I have now seen correspondence from HMRC to KPMG which confirms the following:

  • As long as the employer has payrolled the correct cash equivalent value of the benefits,  (according to 2017/18 rules), the employer won’t have to provide a P11D in respect of these benefits in kind in July 2018;
  • This policy will apply by concession, although strictly speaking the employer will not be classed as an authorised employer for payrolling until the PAYE regulations have been amended.

This is a welcomed confirmation given that the employers concerned have acted entirely correctly, and it was HMRC’s oversight that the payrolling legislation was not amended at the appropriate time.

About Kate Upcraft

Kate is a technical writer, editor and lecturer on all aspects of employing people - primarily payroll and HR matters.

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