Informally payrolling benefits no longer an option for tax year 2021-22 onwards
18 March 2021
There are a very small number of companies that opt to informally payroll benefits. What this means is that they do not register to use the online service for payrolling benefits by the start of the tax year, and instead make an agreement with HMRC to payroll informally for that year.
From tax year 2021-22, this will no longer be an option, and those employers who previously chose to informally payroll benefits are now also required to formally register for payrolling benefits prior to the start of 2021-22. Registration must be completed by 5 April 2021, at the very latest. Within the February edition of the Employer Bulletin, HMRC’s stance was very clear – that it will no longer accept informal arrangements.
Where employers opt to payroll benefits, there is no requirement for them to complete individual P11Ds for any employees who have all of their benefits payrolled. These employers will, however, still need to submit a P11D(b) to HMRC to allow them to pay any Class 1A National Insurance (NI) that they owe. The P11D(b) still needs to be filed by 6 July following the tax year it relates to, and payment of Class 1A NI is required by 19 July, or 22 July, where it is paid electronically.
When payrolling of benefits is operated, the administrative burden relating to providing numerous P11Ds is removed, and there is less pressure relating to that 6 July deadline. It also means that benefits are reported in alignment with employee pay on the Full Payment Submission (FPS). Tax deductions will be made on most employee benefits in real time, rather than in the following tax year, through adjustments to tax codes.
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