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Business Services  •  Business Tax

Is it time to review your payroll operations?

By RJP LLP on 21 June 2022

If you are a business owner and offer your employees benefits in kind, you will be familiar with forms P11D. These are required to declare all benefits provided and to allow HMRC to calculate any additional tax due. Small and medium sized businesses will typically submit this information to HMRC using the Online End of Year Expenses and Benefits Service, an interactive PDF service operated by HMRC. However, the Online End of Year Expenses and Benefits Service is no longer available for 2021/22 submissions. This article explains what the service was, together with the changes, with details of what this means for SME payroll operators. Now may be a very good time to overhaul your business payroll processes for the future.

Understanding the Online End of Year Expenses and Benefits Service

Employers used to have three ways to submit their forms P11D electronically. They could either use appropriate payroll software, the HMRC PAYE Online service (for submissions of up to 500 employees) or use the Online End of Year Expenses and Benefits service (for submissions of up to 150 employees).

The Online End of Year Expenses and Benefits Service was very convenient, because it allowed SME payroll operators to easily create electronic P11D forms for employees.

What now?

Now this facility has been retired, employers have two choices, they can either use payroll software or the PAYE Online service. It is important to be on top of this change because the 2021/22 tax year is only fully completed for payroll purposes when all P11D / P11D(b) returns have been submitted and payments of Class 1A NICs due have been made.

As a result, there are some important immediate considerations for payroll managers and company owners to ensure they can complete the tax year properly. For instance, not all payroll software ‘recognised’ by HMRC will offer the right expenses and benefits functionality – some systems may be approved but not actually able to complete the return properly.

Simply upgrading to a new payroll system can be expensive and there may be a better option. It may also be more cost efficient to outsource payroll management to your accountant as they will be using a more feature rich software solution.

HMRC’s PAYE Online Service is another option to consider and is available to all companies with 150 or more employees on the payroll but is typically more complex to use than the retired service for SMEs. Due to this, it may be more convenient to ask your accountant to complete the required returns on your behalf.

Is there a better solution for P11Ds?

Another, possibly better option is to switch to payrolling expenses and benefits for the 2022/23 tax year and beyond. This means that an employee declares the taxable value of an expense or benefit through the payroll, which negates the requirement for a form P11D. The tax liability is then automatically collected via PAYE, making the ongoing administration much more straightforward.

There is a caveat. Although payrolling expenses and benefits is to manage simpler in the long run, it needs to be set up properly. This involves registering with HMRC and being aware of the taxable benefits on a per-pay-period basis rather than using annual values. Your accountant is best place to help set this up initially to avoid any mistakes.

If you are interested in reviewing your payroll operations and making processes more efficient, contact us via partners@rjp.co.uk.

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If you are a business owner and offer your employees benefits in kind, you will be familiar with forms P11D. These are required to declare all benefits provided and to allow HMRC to calculate any additional tax due. Small and medium sized businesses will typically submit this information to HMRC using the Online End of Year Expenses and Benefits Service, an interactive PDF service operated by HMRC. However, the Online End of Year Expenses and Benefits Service is no longer available for 2021/22 submissions. This article explains what the service was, together with the changes, with details of what this means for SME payroll operators. Now may be a very good time to overhaul your business payroll processes for the future.

Understanding the Online End of Year Expenses and Benefits Service

Employers used to have three ways to submit their forms P11D electronically. They could either use appropriate payroll software, the HMRC PAYE Online service (for submissions of up to 500 employees) or use the Online End of Year Expenses and Benefits service (for submissions of up to 150 employees).

The Online End of Year Expenses and Benefits Service was very convenient, because it allowed SME payroll operators to easily create electronic P11D forms for employees.

What now?

Now this facility has been retired, employers have two choices, they can either use payroll software or the PAYE Online service. It is important to be on top of this change because the 2021/22 tax year is only fully completed for payroll purposes when all P11D / P11D(b) returns have been submitted and payments of Class 1A NICs due have been made.

As a result, there are some important immediate considerations for payroll managers and company owners to ensure they can complete the tax year properly. For instance, not all payroll software ‘recognised’ by HMRC will offer the right expenses and benefits functionality – some systems may be approved but not actually able to complete the return properly.

Simply upgrading to a new payroll system can be expensive and there may be a better option. It may also be more cost efficient to outsource payroll management to your accountant as they will be using a more feature rich software solution.

HMRC’s PAYE Online Service is another option to consider and is available to all companies with 150 or more employees on the payroll but is typically more complex to use than the retired service for SMEs. Due to this, it may be more convenient to ask your accountant to complete the required returns on your behalf.

Is there a better solution for P11Ds?

Another, possibly better option is to switch to payrolling expenses and benefits for the 2022/23 tax year and beyond. This means that an employee declares the taxable value of an expense or benefit through the payroll, which negates the requirement for a form P11D. The tax liability is then automatically collected via PAYE, making the ongoing administration much more straightforward.

There is a caveat. Although payrolling expenses and benefits is to manage simpler in the long run, it needs to be set up properly. This involves registering with HMRC and being aware of the taxable benefits on a per-pay-period basis rather than using annual values. Your accountant is best place to help set this up initially to avoid any mistakes.

If you are interested in reviewing your payroll operations and making processes more efficient, contact us via partners@rjp.co.uk.