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Changes to the benefits-in-kind rules

Kate Upcraft explains in detail the new rules for optional remuneration arrangements – following changes to the benefits-in-kind rules in April 2017 – and what happens when they are payrolled.

Changes to the way some benefits-in-kind (BiK) are valued has caused an unexpected problem for employers who wish to tax such benefits through the payroll. This article explains the problem, which BiK are affected and the HMRC concession which should solve the problem for 2017/18.

Since 6 April 2016 employers have been able to choose to tax most BiK through the payroll (known as payrolling). To payroll a benefit, the employee’s taxable pay is increased by a notional value (typically 1/12th of the annual cash equivalent value that would have been reported on the P11D, if the employee is paid monthly) such that tax is levied on the benefit as well as on the cash pay.