HMRC has clarified that imminent changes to the way benefits in kind are valued where there is an optional remuneration arrangement (OpRA) means that employers will need to update payroll software for P11D and P46 (Car) reporting
This is when the benefit in kind (BiK) is provided rather than a cash allowance, as part of a flexible benefit package with a cash option, or with a salary sacrifice arrangement.
Where there is an OpRA, the taxable value is now the higher of the cash foregone or the taxable value under the normal BiK rules. This applies to all BiKs, including currently exempt BiKs. (See HMRC Employment Income Manual for further information).
Arrangements entered into before 6 April 2017 retain their old treatment, but arrangements entered into since 6 April 2017, or arrangements which have been varied or renewed are taxed under the new rules.
Changes to P11D and P46 (Car) data
As a result, HMRC is making changes to the data which needs to be submitted and payroll software must be updated before 6 April 2018.
P11D
Some of the descriptions on the P11D data submission will also change:
- ‘cost to you’ (or similar) descriptors will read ‘cost to you or amount foregone’. If you are using an OpRA, and the amount of cash foregone is higher than the cost to you, you should enter the cash foregone
- ‘cash equivalent’ descriptors will read ‘cash equivalent or relevant amount’. If you are using an OpRA, and the amount of cash foregone is greater than the cost to you (as above), then you should enter the taxable amount (known as the relevant amount).
The making good field title will not change.
For example, if you provide a service which costs you £280 to provide, but there is a salary sacrifice of £300 you previously entered ‘£280’ in the cost to you and ‘£280’ in the cash equivalent fields. This will now be ‘£300’ and £300’.
A new version of the P11D will be available to view shortly. There are no additional boxes. The online version will be available from 6 April 2018.
P46 (Car)
The P46 (Car) data submission will have a new field ‘cash forgone’. This is the cash foregone for the car only (excluding fuel, maintenance or any other attributable service). This should be completed whenever there is an OpRA.
A new version of the P46 (Car) will be available to view shortly.
Real time information
HMRC will not be asking for any cash foregone figures for OpRA cases in the RTI submission.
Car data reporting
HMRC plans to issue a four-week technical consultation shortly containing draft amendments to the PAYE Regulation.
The amendments will explain what information employers who have registered for voluntary payrolling of car benefits are required to report and how it should be submitted to HMRC. It will also clarify the taxable amounts that need to be reported under OpRA.
The consultation will remain open for four weeks.