In January 2024 HMRC announced that from April 2026, the reporting and paying of Income Tax and Class 1A National Insurance on benefits in kind (BIK) via payroll software would become mandatory.
The government has now delayed the introduction of mandatory payrolling of benefits in kind until April 2027, giving nearly two years’ grace to businesses.
This will reduce the burden on businesses by giving them more time to prepare for the changes.
Confirmation of the delay
Confirmation of the delay was made by Treasury minister, James Murray, who said in a written statement: ‘As recommended by the Administrative Burdens Advisory Board (ABAB), the Institute of Chartered Accountants of England and Wales (ICAEW) and the Employment and Payroll Group, the government has announced a delay to the introduction of mandatory payrolling.’
‘HMRC will continue to engage on design and delivery issues to ensure minimum disruption to employers.’
A welcome move
Whilst it comes as no surprise that a HMRC project has been delayed, on this occasion it is a welcome move as there has been a wide consensus that the change was being rushed through without full understanding of the implications and costs for businesses.
Many employers will no doubt be relieved that they can carry on using P11Ds for another year should they wish to.
Whilst this does give employers some breathing time, the effort taken to move to real time reporting of BIK should not be underestimated and we would encourage employers to consider moving to payrolling BIK before April 2027 which could reduce the administrative burden before it becomes mandatory.
Please contact the tax team for any further information or if you need our help at enquiries@cowgills.co.uk
