ABAB - payrolling benefits in kind

17 June 2019

The Administrative Burden Advisory Board (ABAB) is a group of small and medium business operators and advisers who meet regularly with HMRC and report annually, as an independent body, to the Financial Secretary to the Treasury (FST).

 

Their primary goal is to ‘make a noticeable difference’ for small and medium sized businesses (SMEs), particularly in relation to the administrative burdens imposed by the tax system.

 

Their goals also include being an independent critical friend to HMRC who can critique and influence and to have close consultation with HMRC who have overall responsibility for policy changes.

 

In 2018/19 ABAB’s priorities were:

 

  • Making Tax Digital and EU Exit
  • Culture and Capability for listening (including Digitisation / Technology)
  • Refreshing and building relationships
  • Customer Experience and Lessons Learned including ‘Tell ABAB report’ 

 

Payrolling Benefits in Kind

At the ABAB board meeting in February, one of the topics under discussion was Payrolling Benefits in Kind (PBIK). ABAB’s two main concerns in this area were acknowledged:

 

  1. The need to submit P11Ds is expected to reduce as employers choose to tax Benefits in Kind through their Payroll in real time.
  2. Authorised agents (including Payroll Bureaux) need to be able to register their clients on the payrolling registration service.

It was confirmed that resource has been allocated to this work and a project team has been established to develop solutions. In some situations, employers who are payrolling BIKs, still need to submit a P11D and all employers still need to submit a P11D(b). In the coming months the project team will:

 

  • Explore options for voluntarily payrolling Class 1A NICs in real time to remove the need for the end of year P11D (b).
  • Develop legislative options and implementation plans to allow beneficial loans and employer provided living accommodation to be payrolled, to allow the last two remaining BIKs to be payrolled.
  • Develop a process to allow employers to commence payrolling in-year, to remove the need for a P11D for new employees.
  • Engage with, and provide support, to employers who continue to use informal payrolling arrangements to allow them to transition into the voluntary payrolling framework, to remove the need for them to complete a P11D.
  • To support SME and other employers who use agents, HMRC will look to revive the PBIK agent’s enhancement element of the Agent Service project, to add in the functionality to allow agents to register and use the service on an employer’s behalf. This will be included as part of any wider package of reforms.
  • Ensure an enhanced guidance package will explain the benefits of payrolling with step by step guidance on how to go about payrolling. This will clearly set out the limitations of the current service to manage expectations.

Comments from discussion included that the current process is not conducive to encouraging more employers to payroll.  SMEs, who use agent services rather than in-house payroll departments, are disadvantaged. Allowing authorised agents to register on the PBIK service would require additional functionality - this was originally included as part of an Agent Service project but was postponed due to funding constraints. There are still challenges in the cost and capacity landscape, but HMRC recognise this is an area of importance and will continue to work with a range of stakeholders to work-up and consider requirements.

 

ABAB Board members made the following comments:

 

  • PAYE/RTI causes year end demand where employees want their position set out and the current system does not support this.
  • Process needs to be smoother and Agents requirements need to be built in at the design stage.
  • Employees expect the Personal Tax Return to links up other filing requirements.
  • Agents submitting during February - March are required to use data that is 2 years old.

 

Annual Report

In the recently published Annual Report Better tax for Better business, ABAB said it was surprised and disappointed that progress in the PBIKs area has not advanced as far as anticipated and that the admin burden has not reduced as expected. It also noted that it is frustrating that despite previous assurance, this work has slipped as a priority issue for HMRC.

 

However, ABAB did acknowledge and are pleased by the recent commitment from HMRC’s Income Tax Policy Team (ITPT) to allocate resources and set up a project team to develop solutions to ABAB’s key concerns regarding Payrolling Benefits in Kind. It was recognised that the current parliamentary landscape and constraints on HMRC resources make this a challenging environment to introduce reform, but this reform offers real administrative savings for HMRC as well as customers.

 

HMRC’s current commitment to allocate resources to PBIKs and work with ABAB is good news but highlights there is still a role for ABAB to monitor this and they have scheduled ITPT to attend ABAB’s Quarterly Board meeting to provide a progress report.

 

 

What’s planned for 2019/20

ABAB will continue to prioritise and address the key administrative issues impacting small businesses. Their key priorities for 2019/2020 will include:

  • EU Exit/Brexit
  • Making Tax Digital for Business
  • Tell ABAB survey 
  • Customer Experience (including Customer Journeys/ Behaviours, Research and Insight)
  • Culture and Capability for listening (including Digitisation / Technology)
  • HMRC contact performance 

ABAB has also said that it will remain engaged with the Office of Tax Simplification (OTS) review on Future Technologies [on] the taxpayer, technology and the State, innovation and communication, consumer choices, cashless society and digital exclusion, to understand the impact and effects of these for SME’s.

 

ABAB will also look at how existing tools can be utilised e.g. the Personal Tax Account and Impacts on vulnerable groups.