The institute’s comments are contained in its response to HMRC’s consultation on draft regulations covering employee benefits and expenses which closed on 2 September.

Finance Act 2015 included a measure allowing employers to voluntarily report and deduct tax on employee BIK in real time (known as payrolling), from the start of the 2016/17 tax year and the consultation examined the regulations required to achieve this.

ICAEW says it wants to see payrolling delayed until at least April 2017 to ensure IT systems are ready for the task. It warns that it will not be possible to meet the start date of 6 April 2016 as there is not enough time for HMRC to review the regulations and provide definitive software specifications to its own IT team and third party software developers to design, test and install software that is fit for purpose and to train users.

HMRC also needs to prescribe full payment summary (FPS) data fields and the BiK detail to be shown on end of year forms P60 (to replace P11D information) so employees know what taxable and NICs payable BIK they have been provided with.

Most employers currently payrolling BiK will have to redesign their software and systems to comply to the letter of the statutory requirements; a start date of 6 April makes it unlikely that they will be able to comply with the new rules.

ICAEW argues that the necessary changes to IT to enable BIK to be payrolled satisfactorily need more time and planning, and points out that two and a half years after real time information (RTI) PAYE became ‘business as usual’, there are continuing misunderstandings by employers and errors in liabilities and payment entries on HMRC’s employer PAYE accounts, employee code numbers, communications to employers and P800s, and the anticipated compliance cost savings are not being made.

In its response, ICAEW also states that as the rules are very prescriptive, and do not match what most of the current 3,000 payrolling employers do, it favours legitimising current practices by explicitly permitting HMRC to continue to agree to payrolling methods in individual cases.

ICAEW says HMRC should also publish a model methodology for future payrolling of BIK towards which employers should be encouraged to move by, potentially by a deadline of around 2020. It argues software houses and in-house IT departments could then engage with HMRC ‘at a sensible pace’ about how to make the idealised system work, while not disturbing current practices and Exchequer cash flows, and not exposing employers to unnecessary compliance burdens and penalties.

Details of the HMRC consultation, which closed on 2 September, are available here

ICAEW’s response is available here

Sign up to our newsletter

If you would like to receive regular news alerts about breaking news and developments in tax, accounting and audit, sign up to receive our free newsletter here