Benefits in Kind payments shakeup

Benefits in Kind payment shake up April 2023 - red company car

Benefits in Kind payments shakeup

A new shake-up in Benefits in Kind (BIK) payments allows tax agents to run payroll BIK for the first time for the clients.

The recent announcement from the Government aims to help reduce administrative burdens on employers and enable agents to support their clients more effectively.

All taxable benefits must be valued, such as using a company car. 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 BIK expenses

An employer must report taxable expenses or benefits for employees to HM Revenue & Customs (HMRC) directly via payroll or at the tax year-end. It is also an employer’s duty to report how much Class 1A National Insurance (NI) is due on all expenses and benefits provided and pay any outstanding NI. 

Announced in the March budget, the Chancellor wants to simplify the tax system for taxpayers and their agents by delivering IT systems to enable tax agents to payroll BIKs on an employer’s behalf. 

Agents can report expenses related to company cars, health insurance, travel and entertainment, and childcare.

Digital reporting

HMRC has already confirmed that it requires the minority of digitally capable employers who still submit paper forms reporting employee benefits and expenses to use online forms from April 2023.

It will begin issuing P6 and P9 coding notices using solely digital methods.

Expenses and benefits for each employee do not have to be reported at the end of the tax year if all via payrolled.

There are penalties for non-compliance if employers carelessly or deliberately give inaccurate information in a tax return resulting in not paying enough tax or over-claiming tax reliefs.

Need advice on Benefits in Kind payments and other taxation matters? Contact our payroll and tax advisors.