Payrolling benefits

Posted on 04 May 2023
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HMRC have published a report, Understanding PAYE Delivery Partners, following a research on the attitudes, behaviours, capabilities and capacities of employers and intermediaries in a post-RTI world say Harris & Co accountants Northampton  who specialise in providing payroll services to small businesses.

 
The research sought to obtain a greater understanding of how employers manage Benefits in Kind (BiKs) and Expenses, and to help determine whether HMRC could increase the number of employers who payroll these; explore the roles and relationships within the PAYE system; and determine the impact of real time information (RTI) on payroll companies.

 
In the area of BiKs and expenses, the research found that most employers treat P11D administration as procedural and do not question the process. Businesses with a small number of employees or with simple affairs do not see P11D administration as a burden. The research has, however, found that most employers, and even payroll companies, are unaware of the possibility of ‘payrolling’ BiKs and/or expenses and there is confusion surrounding its meaning. The minority of employers that do ‘payroll’ BiKs and/or expenses have found clear advantages for themselves and their employees. The report suggests that increasing awareness of ‘payrolling’ BiKs and/or expenses could increase take-up amongst larger or more complex employers where a value exchange is seen to exist.

 
According to the report, many employers feel the goodwill demonstrated by employers to their employees is ‘a by-product of a state of affairs where employees do not understand the PAYE system, their role in it, or how their tax is calculated’. As a result, PAYE’s current success can be attributed to the goodwill of employers, because employees can get by knowing very little by relying on this goodwill. Whilst employers agree they deliver on behalf of HMRC, they have no desire to be a partner to HMRC. The report has found that employers prefer that employees be educated to handle their own tax matters and feel that an improved future PAYE system could benefit from simplification (e.g. the removal of paper forms and the ‘de-coding’ of tax codes) and could be in the form of a digital online portal that allows all parties line of sight, with HMRC owning and hosting the account.

 
Finally, feedback from payroll companies has found that although RTI has had a positive start, it was ‘not quite there yet’ and that there were some remaining challenges, the biggest of which includes claims that ‘HMRC can incorrectly allocate submissions, take too long to return receipts and do not have a workable reconciliation process when submissions do not match payments’. Most payroll companies believe that the majority of the hard work with RTI is over and once reporting problems are resolved, the future of RTI should be positive.


 

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