OTS review of employee benefits and expenses - second report

27 March 2014

At the end of January the Office of Tax Simplification (OTS) published a report with a set of recommendations on how to simplify and streamline the complex system for reporting and taxing employee benefits and expenses.

The CIPP policy team has digested the 91 page report and was interested to see the OTS’s aims are to reduce P11Ds by 99% which is a mammoth task. If the government/HMRC/HMT are brave enough to implement their recommendations, we really could see a reduction in burdens in respect of form filling.

The CIPP has for many years lobbied for payrolling and has produced research papers in the past. Each time the majority of the payroll profession has said, get rid of P11Ds and put through the payroll.

There are a number of radical suggestions too, such as Class 1A monthly but then even going as far to say remove Class 1A and make Class 1 on all benefits, with a possible reduction in the percentage rate of course. The only concern we have at the CIPP in respect of the payrolling recommendation is that it would be voluntary and start perhaps with just some benefits. We understand the reason for voluntary and accept the OTS’s observations that as payrolling becomes the “norm” more will do it anyway. However we do have concerns for the employee having multiple employments or just moving between jobs and there being different practices in operation.

We would also encourage HMRC/HMT etc. to look at the way in which benefits are calculated to ensure all benefits in kind can go through the payroll if the employer chooses rather than just some because not all are a good fit. However if of course all are subject to Class 1NICs and there is a change in the rules for them to be annual etc. then this might solve the problem as it wouldn’t need to be NICs at the time of receiving the benefit as it were.

We do hope to see consultation forums set up for the future ‘simplification and streamlining’ with the intention of ‘action’ and not to ‘make sure nothing happens’. The CIPP policy team will of course be involved at every stage.

Karen Thomson has written a full summary of the report which can be read in the April issue of the CIPP magazine; PayrollProfessional which is available to read online now.

Previous CIPP News