The decision to phase in the mandatory payrolling of benefits in kind is a 'welcome step' to allow employers and payroll software providers more time to prepare for significant changes, says the Association of Taxation Technicians (ATT).

Benefits in kind are non-cash perks such as company cars or private medical insurance. Currently, most employers report these once a year using a Form P11D, with tax collected through adjustments to employees' tax codes. This can lead to inaccuracies and the possibility of unwelcome tax bills after the end of the tax year.

Under payrolling, the value of these benefits is added to employees' pay in real time, so the correct tax is deducted through the payroll each month. Although this improves accuracy and transparency it also requires employers to gather detailed information. They must also ensure their payroll systems can handle the changes.

HMRC had planned to introduce mandatory payrolling for all benefits and more detailed information requirements from April 2027. However, it has now confirmed a phased approach will be taken.

Jon Stride, Chair of the ATT's Technical Steering Group, said:

'This is a sensible and welcome step by HMRC. Moving to real-time taxation of benefits should ultimately improve accuracy for employees, but the original timetable based on full implementation in one go was overly ambitious.

'A phased approach gives employers, software providers and HMRC the time needed to get the systems right and avoid unnecessary disruption.'

Internet link: ATT