Notifying HMRC if you payroll benefits

06 February 2014

If you payroll benefits in kind, a reminder that you should inform HMRC in advance using their online form ‘Notification of Payrolled Benefits’.

With thanks to Mike Nicholas for raising with the policy team that HMRC’s guidance appears to have been updated without notification. The following is what employers should do if they payroll benefits:

EMPLOYERS SHOULD inform HMRC in advance if they intend submitting a batch of P11D returns for employees who have had all their expenses and benefits taxed via the payroll. They should do this online using HMRC's online form Notification of Payrolled Benefits. If employers do not do this, their employees will be taxed twice.

The entries in the '1A' boxes in the P11D return normally make up the total value of all expenses and benefits liable to Class 1A NICs, which is then entered in the relevant box in P11D(b) return. However, for payrolled expenses and benefits where there is an 'amount made good or from which tax deducted' box, the entries in the '1A' boxes will not provide the correct value on which Class 1A NICs are payable. In these cases the employer will need to recalculate the total value of all expenses and benefits on which they are liable to pay Class 1A NICs, ensuring the actual amount of the expense or benefit included in payroll is used as opposed to the net 'cash equivalent' amount after payrolling has taken place.

There are separate online returns for employer and agent notification of payrolled benefits.

For further information, refer to HMRC guidance.