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HMRC updates refer to legal P11D forms as "legacy" process
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When did the P11D become a ‘legacy’ form?


A recent HMRC employer’s bulletin introduced a new mechanism for payrolling benefits rather than reporting them on “legacy” P11D forms. Like many payroll specialists, Ian Holloway wondered what was going on.

10th May 2021
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Employers will, of course, have digested the contents of the February 2021 Employer Bulletin, the one that used to be billed as “your route to the latest in payroll news”. Professionals will have been drawn to the end of year reporting section, particularly the part talking about payrolling benefits for 2021/22, the need for registration and the end of informal payroll processing from the end of 2020/21.


Payrolling is the voluntary option that employers can choose to process the taxable value of the benefit through the payroll for income tax rather than declaring the value on the P11D after the tax year has finished. This process does away with the annual P11D exercise disappears, but:

  • Not all benefits can be payrolled, the exceptions being accommodation and beneficial loans
  • While income tax may be collected in real time, Class 1A computations remain an annual liability requiring the completion of the P11D(b); and
  • Employers moving from the P11D to payrolling benefits need to communicate this to employees. After all, the benefit that once formed part of the tax code is now removed from the tax code by HMRC to prevent double taxation.

Payrolling may be something employers want to consider. But the move is not a simple as the Employer Bulletin suggests. Importantly, the collation of information and calculation of the taxable benefit has not disappeared - it becomes an exercise performed each pay period rather than at the end of the year.


So that HMRC can adjust the tax codes (taking the benefit out that is now going to be processed through the payroll), employers need to register for payrolling. This is a relatively simple process where the employer, for example, all items previously declared at box I (private medical insurance) will now go through the payroll for the tax calculation.

Employers do not have to payroll every benefit, and are not able to do so for accommodation and beneficial loans. So, they could just choose to payroll medical benefit, but complete a P11D for car benefit

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Replies (12)

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By neiltonks
11th May 2021 08:28

I agree, mandatory "payrolling" will arrive pretty soon after the point when all benefits can be payrolled. Processing P11Ds is a big headache for HMRC, not least because a large proportion are submitted as paper returns.

I expect this will quickly be followed by employers Class 1A NICs being collected in-year (in line with the tax) rather than after the end of the tax year. Once payrolling is mandatory, it will be hard for HMRC to justify collecting the tax in real time but continuing to give employers until the following July to pay their share. This requirement was introduced a couple of years ago for the Class 1A due on termination payments over £30,000 and sporting testimonial payments over £100,000. I always suspected it was preparing the ground for all Class 1A to be collected in that way, as otherwise it seemed like a lot of trouble to go to in order to collect a relatively small amount of money.

Thanks (3)
By Paul Crowley
11th May 2021 12:40

The expected answer is p11d computations every week or every month.
Well done HMRC. Which week do we put the BUPA annual fee in if it is paid earlier than last year?

Thanks (2)
Replying to Paul Crowley:
By Christine Marsh
13th May 2021 13:07

Haven't had to use it myself, but I believe on the software I use for payroll (Brightpay) there was an option to payroll an annual benefit equally over the 12 months.

Thanks (0)
Routemaster image
By tom123
11th May 2021 14:48

I just don't like the idea.

Plus, (presumably) when you change from one year to the next, it is another thing to cram into that one month window between the old payroll and the new.

It just sounds prone to error, and another thing to review every month.

Thanks (0)
Replying to tom123:
By Rgab1947
13th May 2021 10:13


The payroll does all the work. You just tell the software its a year-end and it makes any adjustments and submission is per normal. No extra work for us. On the contrary a lot less.

You lose a small fee but who cares.

Thanks (0)
Replying to tom123:
By Christine Marsh
13th May 2021 13:15

Have used payrolling benefits for 2 years now, it's as easy as 123. Software calculates tax and employee NI, and produces an annual report which can be sent to employee and used to calculate Class 1A. I'm looking forward to the next stage where software calculates Class 1A in real time and does away with the P11D(b)

Thanks (1)
blue sheep
By Nigel Henshaw
12th May 2021 06:43

I dont really like payrolling, the once a year method seems easier to manage somehow, however as soon as payrolling was announced I expected it would become mandatory so I am not surprised at all

Thanks (0)
Ivor Windybottom
By Ivor Windybottom
12th May 2021 08:59

If HMRC want us to use payrolling they need to make it easier to start payrolling. You have to register in the tax year before it begins!

How do you know the year before that payrolling is going to start next year?!

Surely it should not require registration - we've already got the PAYE scheme running, so JFDI!

Thanks (3)
Replying to Ivor Windybottom:
By Christine Marsh
13th May 2021 13:11

I was advised the reason for registration was so that the individual's tax code was adjusted so that they wouldn't be double taxed in the year, through payroll AND through their tax code - HMRC introduced an 'estimated' benefits system some time ago where they added an assumed benefit into an individual's tax code based on historical payments, but this wasn't always correct and the individual had to wait until end of tax year to recover over taxation. Under this system they remove that tax from the tax code and individual gets taxed on what they receive.

Thanks (0)
By Mr J Andrews
12th May 2021 10:13

Amazing how we accept HMRC's pursuit of pushing administration to employers irrespective of the additional work, time and complications involved. The reply consensus so far indicates and confirms a negative response.
HMRC's head honcho really needs a kick up his #### to get some return to normality within the Revenue's administration before embarking on any new half hearted , half thought out and half baked
''mechanisms''. As Ian Holloway infers , the Revenue's spin on the word ''Legacy'' is sheer b*llocks.

Thanks (0)
By Hugo Fair
12th May 2021 15:40

HMRC's intentions and reality do not always coincide. They love to announce the 'death' of a form or a process (P45 anyone?) at least in their headlines, even though the 'old' processes creak on for many years (just constrained by more and more 'eligibility' factors).

And of course, a bit like George Orwell's Newspeak, they like to impose their own definition on words & phrases ... in this case 'legacy'. Within HMRC, legacy is just a label for anything 'old' that they wish had been replaced - even when it lingers on doing the hard lifting in the more difficult scenarios that occur in the real world.

The way the scope of payrolling has 'evolved' is testament to this low-hanging fruit approach to innovation. Despite being warned right at the start about the incompatibility of RTI with payrolling certain BiKs, it took several years for the necessary data items to be added such that Car, Van & Fuel benefits could be incorporated. And we still don't know their intentions for RTI to cover reporting of accommodation and beneficial loans ... which judging from the mistakes made when introducing cars/etc may work in the 2nd or 3rd year post-introduction.

Of course things do change (anyone else remember sticking NI stamps in the card booklet, or just preparing net pay to use the fewest number of coins in a wage packet?), but what's worrying is that HMRC are now locked into a 'risk management' mindset ... where a kind of 80:20 approach is seen to meet Treasury ambitions, irrespective either of inherent inefficiencies or of inflicting extra costs and resource drains on what they laughingly call their 'clients'!

As always, Neil Tonks is quite correct in his forecasting ... but that won't calm any of the other responders who, not surprisingly, perceive HMRC's announcements as being a one-way street in terms of who gains and who loses. I don't want to be labelled a Cassandra - but when you add in to the mix the forthcoming MTD for IT (SA and corporate) and other plans, I can't help feeling that the gadarene rush towards the exit (aka retirement) on this site has its attractions!

Thanks (2)
By Rgab1947
13th May 2021 10:12

I just cannot understand why its taking so long to payroll the benefits. Its not new. Other countries have had it for 20 years or so.

Even now you must still do a P11D(b). Why?

Its so easy to do. Once the software developers have done their job (and as said its in other countries so no rocket science required), just add the benefits and employee deductions and company contributions all calculated, done and submitted monthly. Employee can see it on their payslips so no surprises for them.

Thanks (1)