HMRC plots P11D review
08 January 2008
Author: Rupert Saunders
Government plans to cut red tape and abolish the P11D benefit-in-kind reporting system will simplify things for HMRC, but business car managers will still need to monitor fleet and fuel use, according to tax experts.
An HMRC consultation paper, is seeking industry views on "simplifying the collection of income tax on employer-provided benefits and expenses". The paper suggests moving to a new system of collecting tax directly through the payroll as part of the established PAYE process, rather than having separate P11D reporting.
At present, employers report all BIK payments annually through the P11D form (pictured) and this is used to adjust tax codes. Under a payroll system, the value of benefits would be added to monthly salary and taxed at the appropriate rate.
"The proposals contained in the consultation paper would simplify things for the revenue from day one," commented Alison Haynes, tax partner at Deloitte. "It is not quite so clear what the benefit would be to employers.
"The information for the P11D would still be needed but for payroll instead. The consultation doesn't go into enough detail. For instance, there is no provision to spread the tax charge and employees could get a double hit if they change their car."
At present, the P46 (car) form is used quarterly to report changes to business car use, including replacement cars, fuel provision or accessories. P46 data is consolidated annually on the P11D.
"I imagine the P46 will continue but become even more important," said Haynes. "The P11D is the critical form at the moment but it will be necessary to report changes and important to file the P46 accurately and on time."
A spokesman for HMRC said it was "too soon" to discuss the future of the P46 and any decisions would depend
on the outcome of the consultation process. The government is hoping for "as wide a response as possible".
Copies of the consultation document are available from the HMRC website (www.hmrc.gov.uk/consult) and responses should be sent by 17 March to: email@example.com.