Mentioned before we believe but a reminder that if you have an informal agreement to payroll benefits in kind, you need to reapply before 6 April 2016 to do so for the year commencing 6 April 2016. Employers will not be able to payroll vouchers and credit cards, living accommodation and interest free and low interest (beneficial) loans.

The payrolled expenses will still need to be included on form P11D(b), regardless of whether they are included in the payroll. P46(car) will not need to be completed if car and car fuel benefits are payrolled.

Only PAYE tax will be paid in the appropriate fiscal month as class 1A NIC will still be accounted for through the form P11D(b) with the payment date of 22 July (electronic) or 19 July (post).

The employer needs to calculate the cash equivalent of the benefit in kind in the same way as they would have done preparing form P11Ds and then divide this by the number of payroll payments to be made in the year. This is the amount added to salary.

If payrolling of benefits is adopted it is essential that restrictions in employees’ tax codes for those benefits are removed otherwise double taxation will occur. It will remove the P11d requirement of reporting those payrolled benefits and hopefully avoid the need for repeated adjustments to an employee’s tax code.

When a new employee does not have a P45, HMRC advises that they should complete a starter checklist for new employees. This ensures they are placed on the correct tax code from the start, preventing unnecessary payroll adjustments later.

The starter checklist replaced the old P46 form, making it the standard method for new employees to provide tax information if they cannot supply a P45.

When Should a Starter Checklist Be Completed?

Employers should ensure that the starter checklist for new employees is completed before the first payroll submission to HMRC. Doing so helps:

• Avoid incorrect tax codes, which can lead to overpaid or underpaid tax.
• Prevent payroll corrections later in the year.
• Ensure compliance with HMRC guidance.

Employees must provide accurate information to avoid being placed on an emergency tax code, which could result in higher-than-necessary deductions from their pay.

Important Reminder: Do Not Send the Checklist to HMRC!

Although the starter checklist for new employees is essential for payroll processing, it must not be sent to HMRC. Instead, employers should retain the completed form for their records and use the information to process payroll correctly.

How We Can Help

At Lewis Brownlee, we assist businesses with all aspects of payroll compliance, including handling new employee tax codes and ensuring correct payroll submissions. Our services include:

• Payroll setup for new employees.
• Ensuring accurate tax coding to avoid issues.
• Compliance with HMRC payroll requirements.

If you need expert payroll support, contact us today via our contact page to ensure smooth onboarding for your employees. Plus, be aware that we do offer a free introductory meeting. These are specifically designed for you to find out what we do and how we do it. So, you have nothing to lose by finding out, free of charge, before you commit.

Getting payroll right from day one avoids unnecessary adjustments and ensures new starters are paid correctly!

Employers who wish to use this service to payroll employee expenses and benefits instead of submitting forms P11D must register before 5 April 2016. This hopefully will reduce time for employers as currently, even if benefits in kind are payrolled, forms P11d (return of expenses and benefits) are still required and often leads to an employee being taxed on the benefit in kind through the payroll and have a restriction in their coding notice. It will not be obligatory.

This is optional and can be used from 6 April 2016. Why should you use it? Well, it means that the tax due on benefits in kind can be calculated each month based on the anticipated amount of the benefit rather than wait for a coding notice change to be made. It is too late to prevent benefits in kind being included in the initial 2016/17 PAYE coding run but the codes can be adjusted if you register before 5 April 2016.

The effect will be that the benefit will be removed from the tax code and instead the estimated amount of the benefit added to pay simply to work out the tax due.

This new scheme which is voluntary should mean that a sum closer to the correct amount of tax due should be deducted.