Some employers provide benefits to employees but then require the employee to “make good” in other words reimburse the employer for the cost or part of the cost and thus reduce the reportable benefit or cancel it out altogether.
Unfortunately, legislation sets out different dates for making good.
Additionally, there are practical difficulties in complying with the dates in legislation for some benefits-in-kind, which has led to inconsistencies in HMRC’s guidance.
The recent introduction of new dates for making good on benefits-in-kind where the employer accounts for the benefit-in-kind in real time through PAYE (payrolling) has highlighted this lack of consistency and potential for confusion.
The government announced at Budget 2016 that they would consult on proposals to align the dates by which an employee has to make a payment to their employer in return for a benefit-in-kind they receive, in order to ‘make good’.
The consultation explores the scope for aligning the ‘making good’ rules for benefits-in-kind with those which apply to ‘making good’ where the employer accounts for the benefit-in-kind in real time through Pay As You Earn. The aim is to have a simpler and clearer system that makes it easier for employers and employees to understand their obligations.
The consultation document was issued on 9th August with a close date of 4 October.
Comment
We strongly urge those with interests in this area to look at the document and submit their comments to employmentincome.policy@hmrc.gsi.gov.uk
It would be lovely if we could have one simple regime, but life has taught me that there are invariably exceptions to the rule.
The simple rule would be for the time limit for making good to be either 5th April at the end of the tax year or 6th July which is the P11D submission deadline. However, that would immediately cause potential problems if the benefit was subject to Class 1 NI and not Class 1A.
Hold on a minute, this surely is touching on the alignment of tax and NI – now, wouldn’t that be lovely!
