Charities should plan early in preparation for “complicated” upcoming changes to legislation for the payrolling of benefits in kind, an employment tax expert has warned.
Speaking at the Charity Tax Group Conference in central London today, Simon Thurston, associate director at the accountancy and business advisory firm BDO UK, said charities that provide benefits in kind to their staff must be prepared for mandatory changes coming in 2027.
A P11D is a UK tax form employers use to report benefits in kind provided to employees and directors to HM Revenue and Customs.
Thurston said there was a “lag” in the current system because HM Revenue and Customs was not informed about a benefit in kind provided in the current tax year until the P11D was submitted in the following July.
“Typically in any given tax year, through the tax code process, you’re potentially collecting an estimate of the current year’s tax on that benefit and also the previous years’ underpayments as well,” said Thurston.
The government is set to mandate the payrolling of benefits in kind in April 2027 with HMRC aiming to collect taxes on benefits in kind in real time through the changes.
There is also the option to voluntarily adopt the new system fully or partially from next April.
“If you haven’t started planning, plan early, because it’s a lot more complicated than a lot of employers realise,” said Thurston.
When asked about the primary beneficiary of the new system between HMRC and employers, Thurston said the first year might be “challenging” for employers.
“HMRC has said that provided you’re trying to do the right thing as an employer, they will be sympathetic if you make an error in terms of penalties,” Thurston said.
“So there’ll be a light-touch penalty for the first year and it will take time for employees to get used to it, but I think once we’re through a year or two, things will settle down.”