HMRC has listened to feedback

In an update to their policy paper, published 15 June, HMRC has decided to slow down the mandatory shift to taxing most benefits in kind through the payroll.

Initially, the move was scheduled to start from 6 April this year, but after strong representations from stakeholders, especially software developers, the move was postponed to 6 April 2027.

HMRC published its draft interim guidance on payrolling benefits last November, and this included a timeline of events that would take us through to implementation.

Stakeholders were invited to comment on the interim guidance, and it seems that HMRC has listened and is acting on the feedback by slowing things down.

Payrolling benefits will now be introduced in stages

Stage 1 – from 6 April 2027, company cars, car fuel, vans, van fuel and employer- provided medical benefits must be taxed through payroll

Stage 2 – from 6 April 2028, all other benefits except loans and accommodation must be taxed through payroll

Stage 3 – loans and accommodation will be mandated for at some point in the future

This is good news for payroll providers as it gives them more time to make sure that they are prepared, but the PAYE landscape is starting to look like the Hokey Cokey with some benefits in and some benefits out.

The knock-on effects are potentially eye- watering for employers who provide a range of benefits to their employees, including:

• New software updates to accommodate the staged introduction
• Different data collection dates for benefits
• 13 payment dates for Class 1A NICs, though employers may be able to voluntarily report and pay Class 1A NICs for non- mandated benefits through the payroll
• Providing employees with P11Ds and statements for benefits that have been payrolled
• Explaining the transitional arrangements to employees

We can expect further technical guidance next month, and HMRC will continue to listen to feedback over the summer. The final guidance for phase 1 will be published to align with the Autumn budget.

Contact the team

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