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Payrolling Benefits In Kind - The Facts

From 6th April 2016, changes to the Pay As You Earn (PAYE) system came into force, affecting any dental practices who provide benefits to their employees. Benefits in Kind (BiK) are benefits that employees receive that do not come in the form of cash. 

These are often referred to as ‘perks’.They include the likes of company cars, travel expenses and private medical insurance. In order to start payrolling benefits in kind, employers must register with HMRC’s online Payrolling Benefits in Kind service. 

This is accessed through the employers Government Gateway account. Employers who intend to payroll benefits and expenses for the 2018/19 tax year must register before 5 April 2018 as HMRC will need to amend employees' tax codes in advance to remove any BiK’s previously included.

This is a voluntary service. Practices are not required by law to introduce this service. If they choose to use it they will no longer be required to complete a form P11d for relevant employees but a form P11D(b) will still need to be filed.

There are certain benefits that will not be able to be payrolled, these include:

Living accommodation, and

Interest free and low interest (beneficial) loans

The payrolling of BiKs makes it easier for employees to understand and it is more efficient at collecting the right amount of tax in real time (each pay period). 

Another advantage to this system is that employers can choose to payroll company cars meaning they no longer have to submit a 'P46 Car' form when they provide an employee with a car.

After registering to payroll, BiK practices must continue to do so until the end of the tax year unless either of the following applies:

There is insufficient income to cover the tax on the BiK

If you stop providing BiK to your employee