Kate Upcraft provides some additional explanation of HMRC’s advice concerning benefits and expenses set out in Employer Bulletin issue 68.
Parts two and three of this series will cover the reporting of company cars on P11D and P46(Car) as well as under OpRA, the revised business tax accounts, RTI data and student loans.
New benefit in kind rules
HMRC published the business rules for the 2017/18 P11D and the 2018/19 P46(Car) in August 2017, so software developers could begin work on preparing to support the OpRA changes that took effect in April 2017.
There will be multiple populations of employees to consider when you compile the P11Ds in June and July 2018. This is how you need to report for each different group:
Benefits plus salary
Employees who receive benefits in kind in addition to salary, or who select from a flexible benefits fund but can’t exchange any additional salary for benefits in kind. For these employees the value of benefits reported on the P11D will still be the ‘cash equivalent value’ value following the rules in the benefits code.
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Transitional protection for OpRA benefits
Employees who signed up to OpRA (salary sacrificed) benefits before 6 April 2017, and who have not lost their transitional protection by amending their contract on, or after, 6 April 2017 will have transitional protection to 5 April 2018 or 5 April 2021, depending upon the type of benefit selected. The later deadline is for cars, living accommodation and school fees. The P11D value for 2017/18 is the cash equivalent value following the rules in the benefits code.
No transitional protection for OpRA benefits
This group signed up to OpRA benefits before 6 April 2017, but have lost transitional protection because of a contract change post 5 April 2017. Alternatively, they signed a contract for an OpRA benefit on, or after, 6 April 2017. For these employees you need to follow either a) or b) when reporting:
- The amount foregone (sacrificed) if the benefit would normally be tax-exempt when provided outside of an OpRA arrangement, e.g. mobile phone, workplace parking.
- The higher of the “amount foregone”, or the normal cash equivalent value. Then any amount made good from net pay such as a car private use contribution or spouse medical cover should be entered in the ‘made good’ box to reduce the taxable amount.
Unless the Chancellor makes any changes in his Budget on 22 November 2017, there is no reporting due for any of the tax-exempt benefits that can still be provided tax-free even via an OpRA, which are:
- Pension contributions and advice
- Childcare (existing members only by 6th April 2018)
- Outplacement counselling and retraining costs
- Bicycles and bicycle equipment
- ‘Green’ cars with emissions of 75 g/km or less
- Holiday purchase.
As I reported in July, HMRC had to fix a hole in the legislation, when it emerged that they had omitted to update the PAYE regulations to allow for the ‘higher of amount foregone or cash equivalent value’ to be payrolled.
Employers who have registered for payrolling benefits in kind that are provided via an OpRA are probably one step ahead of HMRC, as they have been adding the correct value as a notional addition to taxable pay for each pay period, to ensure the right value is taxed. We expect a consultation to be issued on the updated PAYE regulations shortly, but they won’t be amended until April 2018.
However, it isn’t correct to say, as it does in the Employer Bulletin that “HMRC will not be asking for any cash foregone figures for OpRA cases in the RTI submission”. That's exactly what HMRC needs in the FPS, the correct modified cash equivalent added as a notional value to taxable pay and also populated in field 60!
About Kate Upcraft
Kate is a technical writer, editor and lecturer on all aspects of employing people - primarily payroll and HR matters.