Historically, private medical insurance payments and other less complicated benefit types have been "payrolled" by employers in order to minimise the number of P11D's to be completed each year by local arrangement with their tax office. Prior to the introduction of the legislative framework for Payrolling of benefits, HMRC had negated any advantages payrolling may have had by insisting that P11D's continue to be completed in these circumstances. Their instructions are for the amount of the premium paid by the employer to be entered together with a reduction for the amount made good through the payroll by the employee thus leaving a nil value on the P11D.
Class 1A NIC values must also be adjusted to accommodate these "Payrolled benefits"
HMRC’s February 2019 issue of the Employer Bulletin contained a few important reminders for those employers that have entered into the voluntary payrolling of benefits:
- A P11D must still be produced for any benefits you’ve not payrolled
- A P11D(b) still needs to be sent to HMRC informing them about the Employer Class 1A NICs due on all benefits (including payrolled ones)
- You’ll also need to to give your employees a notification telling them which benefits were payrolled, and telling them the amount of the benefit.
HMRC also noted that if an employer has had a reminder to send a P11D/P11D(b) but didn’t actually pay any benefits they still need to:
- Submit a ‘nil’ return.
- Complete the ’Employer – No return of Class 1A’ form
Extract from HMRC’s February 2019 issue of the Employer Bulletin
More information can be found in the HRMC article - Payrolling: tax employees' benefits and expenses through your payroll
P11D Organiser "Payrolled" benefits system functionality
Payrolled benefits can be managed and processed using the P11D Organiser for the majority of benefit types, the process involved is to create the benefit records with a corresponding payrolled value which will then show as zero taxable to the employees on their benefit statements. The benefit properties contained within the system can then be set as "payrolled" for these benefit types which will in turn set the system up automatically to adjust the Class 1A NIC values and P11D(b) reports accordingly.
Importing benefit records
As an example, here is a step by step guide to go about payrolling benefits for Section I Medical treatment or insurance - this principal will work for most other benefit sections too. For more information on importing generally, please refer to the importing guide.
1. Include a "PAYROLLED" column in your import file that contains the same financial values as those in the "PREMIUM" column (copy & paste works well!)
2. Import the file into the system using the Import wizard:-
Add new benefits if necessary (or Change if existing)
Set Payrolled Benefit flag to "Yes"
^^^^ (Repeat the previous 2 steps for as many "NEW" benefit descriptions that are in the import file) ^^^^
Continue Importing as normal.....
The "payrolled" benefit records will now have been sucessfully imported and created in the system.
To view the section I benefit records that have been created in this import...
Run a Filter (Section I) to create a lookup of all benefit records of that type...
Confirm Yes to the creation of the lookup
Confirm OK to the lookup confirmation message
Select an employee record to view and double click to drill-in to the chosen record
Click Edit to view the selected benefit record
The record shows the payrolled amount equal to the premium and zero benefit in kind reportable to HMRC for the employee.
The employees benefit statement will shows that the benefit has been payrolled and that there is no additional P11D Tax liability. Additional text can also be added to the benefit statement to explain the position to the employees.
Class 1A NIC & P11D(b)
As the benefit profile settings have already been applied as "Payrolled" the system will automatically adjust the CLASS 1A NIC values on the P11D(b), the on-line FBI Gateway return, and all other Class 1A reports for the correct amount of Class 1A NIC payable for the "payrolled" benefit categories.
Benefits profile for the employer (displays the "Payrolled" settings applied)
EOY FBI Gateway return showing adjustments for payrolled items.
Class 1A NIC summary report