Draft legislation: review of employee benefits and expenses

08 July 2015

The regulations that set out the statutory framework for payrolling BiKs have been extended to include all BiKs other than accommodation, beneficial loans and credit tokens and vouchers. Additional reporting requirements for employers payrolling cars will be introduced from April 2017.

Finance Act 2015 included a package of measures that, from the start of the 2016-17 tax year, will give effect to a number of recommendations made by the Office of Tax Simplification (OTS) in its 2014 Report "Review of employee benefits and expenses: second report". The measures were:

  • the abolition of the £8,500 threshold for benefits in kind;
  • allowing employers to voluntarily report and deduct tax on benefits in kind in real time (known as 'payrolling');
  • introducing an exemption for qualifying business expenses.

To deliver the details of these changes, a number of Regulations are required:

  • The Income Tax (Pay As You Earn) (Amendment No *) Regulations 2016 remove the requirement for employers to make end of year returns on forms P9D:
  • The Income Tax (Pay As you Earn) (Amendment No *) Regulations 2016 allow authorised employers to payroll many benefits in kind and removes the requirement for such employers to make annual returns for each employee they provide a benefit to;
  • The Income Tax (Approved Expenses) Regulations 2016 set out the approved rates that employers can use under the new exemption for qualifying business expenses, without the need to contact HMRC for approval;
  • The Income Tax (Pay As You Earn) (Amendment No *) Regulations 2016 remove the requirement for employers to report expenses paid to employees (whether deductible or not) on form P11D at the end of the tax year.

HMRC has published draft regulations, together with draft Explanatory Memorandum, for a period of technical consultation that will close on 2 September 2015.