14 August 2024
Have you processed a benefit through the payroll and realised at the end of the year there has been an error resulting in an underpayment? The Advisory Team had a question in this area, a system error that resulted in month 12 benefits not being processed, here is the answer:
When an adjustment needs to be made to benefits processed via the payroll then HMRC guidance states that where an employee is still working for an employer then the adjustment can be carried forward to the first pay period in the next tax year. As the employee is still active then there would be no requirement for a P11D to be submitted to correct the error.
Payrolling: changes affecting benefits and expenses - GOV.UK (www.gov.uk)
You would also need to correct the P11D(b) for the previous tax year as Class 1A NICs cannot be carried forward to the next tax year. To avoid paying Class 1A NICs on these adjustments in the next tax year you would be advised to keep a record of the amounts involved.
If the worker has since left the business, you instead have two options:
- Include the balance on the FPS
- Include the balance on the P11D form
HMRC will contact the employee to claim the tax owed regardless of the option used.
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