The Government has announced a shake-up in how tax due on Benefits in Kind (BIK) is paid. The move will allow tax agents to run payroll BIK on behalf of clients for the first time.
The Government says it will help to reduce administrative burdens on employers and enable agents to support their clients more effectively.
If an employer provides a taxable benefit, such as the use of a company car, the taxable benefit has to be valued. For most types of BIK, the law sets out how to work out the value, with tax paid on the taxable value of the benefit.
Report expenses
It is currently the duty of employers to report taxable expenses or benefits for employees to HM Revenue & Customers (HMRC) directly through payroll or at the end of the tax year. They are also required to report how much Class 1A National Insurance (NI) is owed on all the expenses and benefits provided and pay the outstanding NI.
In a move to simplify the system for taxpayers and their agents, it was announced in the Spring 2023 Budget that IT systems will be provided to enable tax agents to payroll BIKs on behalf of employers.
Agents will be able to report expenses related to company cars, health insurance, travel and entertainment, and childcare on behalf of their clients.
Digital reporting
HMRC has already confirmed that it will require the minority of digitally capable employers who still submit forms reporting employee benefits and expenses on paper, to use online forms from April 2023.
It will then move to issuing P6 and P9 coding notices solely using digital methods.
Expenses and benefits for each employee do not have to be reported at the end of the tax year if all expenses and benefits are payrolled.
There are penalties for non-compliance if employers carelessly or deliberately give inaccurate information in a tax return that results in an individual not paying enough tax or over-claiming tax reliefs.
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