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HMRC has published a consultation document looking at the pros and cons of collecting tax on benefits in kind and expense payments through the payroll, and considering the scope for simplifying the collection of income tax on employer provided benefits and expenses.
The document also looks at the potential effects of removing the £8,500 earnings threshold, below which tax is not paid on benefits.
Any changes adopted would take effect from April 2011 at the earliest.
HMRC believe that dealing with benefits and expenses through PAYE would significantly reduce the overall amount of information that an employer needs to provide about benefits and expenses, and lead to the abolition of the entire P11D process.
While this would reduce employers' reporting requirements, Bourne Business Consulting points out that the document says little about the significant cash flow advantage that would be created for the government should the document be passed.
Alastair Kendrick of Bourne Business Consulting LLP says that 'it is true that the abolition of the P11D form would result in one less administrative burden', but adds that 'the employer will need to administer the systems to ensure benefits are caught to Class 1A NIC and not Class 1.
'This is a recipe for error that could lead to penalties being levied.
'Most people do not have a problem with the current system which begs the question; why change to a complex system that increases the prospect of error and is likely to lead to problems with general tax compliance?'
Responses should be sent by 17 March 2008 to:
Paul Harris
HMRC Simplifying Reporting and Accounting Procedures for Benefits in Kind & Expense Payments 29,
Room 1E/07
100 Parliament Street
London SW1A 2BQ
Email: pa.harris@hmrc.gsi.gov.uk
