At the end of April, the Government announced a series of administration and simplification measures covering tax and customs as part of their Tax Update: Simplification, Administration and Reform (TUSAR) day. Of the 39 measures, four are intended to help employers.
Delay to compulsory payrolling of benefits
The headline announcement for employers is the delay in the mandatory payrolling of benefits in kind. The measures will now be introduced from 6 April 2027 instead of 6 April 2026. The ATT welcomed this announcement, following concerns expressed by both the tax and payroll professions. The changes to processes that payrolling benefits require are significant, and many employers were concerned about having enough time to adapt.
In addition to giving a longer lead time to allow employers to prepare, HMRC has also provided more guidance on complex cases. Benefits such as employer-provided loans and accommodation, which were proving difficult to bring into the new regime, will not need to be payrolled from April 2027, although employers can do so on a voluntary basis if they wish.
Payrolling of benefits allows employers to deal with the tax on employees’ benefits as part of their regular payroll activities. Under this approach, employers add the cash equivalent of any benefits to the employee’s salary each pay period and report it via Real Time Information (RTI), rather than reporting the benefit via a P11D at the end of the year. Payrolling benefits means that employees pay the tax on their benefits in real time, which can reduce the amount of paperwork needed at the end of the tax year.
Finally, HMRC confirmed that it will take a ‘light touch’ approach to penalties for inaccuracies in the first year (2027-28), while employers get to grips with the new reporting requirements for benefits. Penalties for inaccuracies will only be charged if there is evidence of deliberate non-compliance.
Check Employment Status for Tax Digital Tool
If you use HMRC’s Check Employment Status for Tax tool (CEST), you may have seen that it has recently been revised and updated. Some of the questions have been amended, and HMRC have updated their guidance to help users with the new wording.
The CEST tool is provided by HMRC to help engagers and workers check the employment status of a new or existing contract. HMRC says that, provided the tool is used correctly, they will accept the status determined by CEST.
Employment related securities
From 1 May 2025, a simplification will be introduced to the process for electing to transfer the employer’s National Insurance Contributions liability to an employee who acquires employment related securities, such as shares, from the employer. Employers will no longer be required to submit the election form to HMRC for pre-approval, provided that they are using the election form template on GOV.UK.
Reversal of requirement to report detailed employee hours
The final measure in the employment section concerned the requirement to report more details of employee hours. The Government had already announced this would not go ahead in January, and this was reconfirmed as part of TUSAR day. Employers are reminded that the existing requirement to report normal hours worked, via RTI, will continue.
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