Policy paper: Country by country reporting – updated

Updated: Amendments to the detail section with updates to the Country-by-Country legislation.

This measure will require UK headed MNEs and enable non-UK headed MNEs to provide HMRC with information about global activities, profits and taxes.

More information can be found at The Taxes (Base Erosion and Profit Shifting) (Country-by-Country Reporting) Regulations 2016 No. 237.

This legislation updates the Country-by-Country (CbC) reporting regulations The Taxes (Base Erosion and Profit Shifting) (Country-by-Country Reporting) (Amendment) Regulations 2017 to take account of international developments. In particular the legislation:

  • brings partnerships into scope
  • amends the UK ‘local filing’ requirements
  • introduces a notification requirement

HMRC has published guidance on the notification requirement in the International Exchange of Information Manual and will publish full guidance in due course. A tax information and impact note has also been published please read Amendments to Country By Country reporting 2017.

Source: HMRC

Consultation outcome: Tobacco Illicit Trade Protocol – licensing of equipment and the supply chain

Updated: Published a second summary of responses document ‘Tobacco Illicit Trade Protocol – licensing (or equivalent) of the supply chain – summary of responses’ which summarises the responses received on possible licensing of the tobacco supply chain, and sets out the next steps.

This consultation is about Article 6 of the World Health Organisation Framework Convention on Tobacco Control (WHO FCTC) Protocol. The aim of the Protocol is to eliminate illicit trade in tobacco products.

At Autumn Statement 2015 the government announced its intention to consult on Article 6 of the Protocol.

Article 6 of the Protocol is concerned with registration or licensing of participants who trade in tobacco and tobacco products.

The consultation is seeking views on two aspects of Article 6:

  • the mandatory control of tobacco manufacturing equipment
  • whether the UK should license wholesalers, retailers, brokers etc of tobacco products

The government is keen to ensure that any response to the illicit tobacco trade is proportionate and does not add an undue administrative burden on business. It will therefore be seeking views from a wide range of stakeholders to establish clear evidence-based rationale for its decisions.

No decisions have yet been made in relation to whether parties in a supply chain should be licensed or whether some but not all parties should be licensed.

Source: HMRC

National Statistics: Hydrocarbon Oils Bulletin

Updated: Update with provisional data from March 2017 to May 2017

The Hydrocarbon Oils Bulletin contains statistics and analysis on the duty receipts and clearances for petrol, diesel and other hydrocarbon oils in the UK. The bulletin is updated quarterly.

Source: HMRC

National Statistics: Tobacco Bulletin

Updated: Update with provisional data from February 2017 to April 2017

The Tobacco Bulletin contains statistics and analysis on the duty receipts and clearances for all tobacco products in the UK. The bulletin is updated quarterly.

Source: HMRC

Detailed guide: Payrolling: tax employees’ benefits and expenses through your payroll

Updated: The employee pays towards the cost of benefit section has been updated to remove the tax deadline date.

Registration for payrolling benefits and expenses

If you’re intending to payroll any benefits and expenses, you must register them with HM Revenue and Customs (HMRC) using the payrolling employees taxable benefits and expenses service. You must do this before the start of the tax year.

Using the online service for payrolling benefits and expenses means that you won’t have to submit a form P11D. You must tell HMRC which benefits you want to payroll during the registration process.
The tax codes for all employees receiving these benefits will be amended, unless you exclude any employees that you don’t want to payroll benefits for in the online service.

If you miss the registration deadline, you can’t payroll benefits until the following tax year. However, if you have a valid reason, HMRC may agree that you can informally payroll, but you must still complete form P11D at the end of the tax year. Mark each P11D ‘Payrolled’. This stops HMRC collecting tax that has already been deducted from your employees.

Deregistration from the online service

Your registration is continuous so you only need to tell HMRC if you decide to deregister. You can do this before the start of the tax year using the online service.

If the tax year has started when you change your mind, you must wait until the end of the tax year before you stop payrolling. You’ll still need to deduct tax each payday and report this deduction to HMRC.

Benefits you can payroll

You can payroll all benefits except:

  • employer provided living accommodation living accommodation provided by the employer
  • interest free and low interest (beneficial) loans

You must still report these benefits on a P11D, even if you’re payrolling other benefits for the same employees.

If you choose to payroll company car benefits, you’re not required to submit form P46(Car). But if the car benefit is not being payrolled, you must submit a P46(Car).

Tell your employees

Once you’ve registered to payroll benefits, you must provide your employees with a letter explaining that you’re payrolling and what it means for them. You must also provide your employees with the following information before 1 June after the end of each tax year:

  • details of the benefits that have been payrolled, for example car fuel
  • the cash equivalent of each benefit that’s been payrolled
  • separate details of any benefits you haven’t payrolled

You can include this information on your employees’ payslips or in a separate note or statement.

HMRC recommends that whatever you do, you make it clear to your employees:

  • what benefits have been subject to PAYE tax
  • how much of the value of each benefit you’ve collected and reported tax on

If your employees complete a Self Assessment tax return they’ll need these details so they can report them to HMRC.

New employees

If you have a new employee and you provide them with a benefit that’ll be payrolled, you must explain how the benefit will be taxed.

Tell the employee that:

  • their tax code may be amended to adjust any benefits from previous employments
  • the new benefit won’t be included in their tax code
  • any underpaid tax that they may be paying through their existing tax code will still be collected via the tax code

Class 1A National Insurance contributions (NICs)

You’ll still need to work out the Class 1A NICs on the cash equivalent and complete form P11D(b). The Class 1A NICs liability applies whether you’re payrolling the benefits or they’re reported to HMRC on form P11D.

You must keep a record of cash equivalents for benefits you provide throughout the tax year so that you can accurately report and submit your P11D(b) and the associated Class 1A NICs payment. This must be done by 6 July after the end of the tax year.

Find more information on how to submit a P11D(b) in CWG5:Class 1A National Insurance contributions on benefits in kind.

Example: employer wants to payroll the health insurance benefit to their employees.

They pay £600 per year, per employee for this. They tell their employees that they’re going to payroll this benefit.

They register with the online service and select medical benefit as the benefit they want to payroll.

Their employees’ tax codes automatically change to take out the adjustment for this benefit – the employees are informed by HMRC.

During the tax year, the employer works out the taxable amount of the benefit and adds this to the employees’ actual monthly pay.

The annual cost is divided by the number of paydays in the year, and the employees pay tax on this amount. This can be worked out as:

£600 ÷ 12 = £50 per month

Working out the cash equivalent

You work out the cash equivalent of a benefit for payrolling in the same way as you do for a benefit that you report on a form P11D.

If you’re not sure what the value of the benefit is at the start of the tax year, you can make an estimate of the cash equivalent of the benefit. You can then adjust it later in the year when you know the exact value.

To work out the cash equivalent of the benefits you provide, you can use the following:

The taxable amount must be included in:

  • the P60 at the year-end as part of the ‘total taxable pay in year’
  • any P45 in the ‘total taxable pay to date’ field

Pay periods used to payroll the taxable amount

To work out the taxable amount of the benefit that you payroll each pay day, you need to know the number of days you expect to pay your employees during the tax year. The number of paydays is determined by the interval between each pay day (the pay period). Most employees are paid weekly, calendar monthly or 4 weekly.

Example: employee has a company car with a cash equivalent of £5,200.

Employee is paid weekly (52 pay days). The taxable amount of the benefit is £5,200 ÷ 52 = £100. Employer then adds £100 to employee’s taxable pay at each payday.

Employee is paid monthly (12 pay days). The taxable amount of the benefit is £5,200 ÷ 12 = £433.33. Employer then adds £433.33 to employee’s taxable pay at each payday.

Employee is paid four weekly (13 pay days). The taxable amount of the benefit is £5,200 ÷ 13 = £400. Employer then adds £400 to employee’s taxable pay at each payday.

Irregular pay periods

Irregular pay periods are payments of employment income which have no set pattern. To work out the taxable amount of the benefit, divide the cash equivalent by 365 then multiply by the number of days to the pay period date from the start of the tax year.

Example: employee provided with a car benefit with a cash equivalent £5,200 for the tax year.

The employee is paid on 31 May, which is 56 days into the tax year.

£5,200 ÷ 365 x 56 days = £797.80 value to be added to the taxable pay in that period.

The next time you pay your employee, calculate the period the benefit was provided from their last pay day, rather than from the start of the tax year.

How to deduct or repay tax

You add the taxable amount of the benefit to your employee’s pay to be able to deduct the correct amount of tax.

Example: employee earns £24,000 per year, is paid monthly and has a company car with a cash equivalent value of £5,200.

Before payrolling employee’s monthly taxable pay is £2,000 (£24,000 ÷ 12 = £2,000).

The taxable amount of the car benefit at each pay day is £433.33 (£5,200 ÷12 = £433.33).

Employee’s total taxable pay when payrolling is £2,433.33 (£2,000 + £433.33 = £2433.33).

Once the total pay and the taxable amount of the benefit is recorded on the payroll, PAYE tax should be calculated.

Employee pays towards the cost of a benefit

Employers may agree to employees making a payment towards the cost of a benefit, this is known as ‘making good’. When employees do this, the cash equivalent of the benefit is reduced.

If the full cost of the benefit is made good, there’s no taxable benefit as the employee has paid for it.

Any amounts made good will have no effect on the cash equivalent, meaning the benefit will remain taxable and liable for NICs and can’t be adjusted by the employer.

For benefits which are payrolled, the guidance below explains what to do in different circumstances.

Employee fails to make good a benefit by the final payday

Where the cost of a benefit is known, and the employee hasn’t made good by the final payday, you must:

  • work out the taxable amount of the benefit still to be taxed
  • add the taxable amount to the employee’s final wage payment of the tax year
  • calculate the tax to be deducted

You’re unable to deduct the full amount of tax from the final wage payment, if it exceeds 50% of their pay.

Making good: car and van private fuel benefit

You may have an agreement with your employee that they’ll make good the actual cost of private fuel to avoid a fuel benefit tax charge on a company car or van.

You might not know how much fuel has been purchased by the end of the tax year because either:

  • you’re waiting for the bill for the fuel to be sent from the supplier
  • your employee may not have been in a position to calculate their private miles at 5 April

When you find out the actual cost of fuel for private mileage, your employee has until 1 June to make good all or part of that cost.

If your employee fails to do so, you must:

  • work out the fuel benefit charge
  • add the fuel benefit charge as a taxable amount to the next wages payment on or after 1 June
  • calculate PAYE

If the benefit continues after the 1 June, you must:

  • recalculate car fuel or van fuel benefit for the current tax year
  • include it as a taxable amount of benefit each payday

This is to prevent a similar occurrence at the end of the next tax year.

Making good: credit tokens

You may have an agreement with your employee that they can use your business credit card but that they will make good any private costs they incur using the card.

You might not know how much your employee spent on private goods and services using the credit card by the end of the tax year. For instance:

  • you’re waiting for the bill to be sent from the provider
  • your employee may not have details of the transaction

Once the amount is known, your employee has until 1 June to make good the actual cost of the benefit.
If your employee fails to make good all or part of the cost by 1 June following the end of the tax year, you need to:

  • work out the amount of the benefit still to be taxed, taking into account any previous amounts made good
  • Add the amount to the next payment of wages on or after 1 June
  • payroll the cost of any use of the credit card in Year 2, without allowing the making good promise

Example:

An employee has use of a company credit card for the tax year and the amount spent is £120. By prior agreement at the start of the tax year, the employee promises to and makes good £30. That means the taxable amount at the end of the year is £90.

The employee also agreed at the start of the tax year that the employer would tax £5 per month through payrolling in anticipation of a benefit. So £60 of the credit card bill was payrolled.

At the end of the tax year, the employer takes away the payrolled amount of £60 from the taxable amount of £90. This leaves an amount of £30 still to be taxed.

If the employee doesn’t make good the amount of £30 by 1 June, then that’s added to the next payment of wages on or after 1 June.

If the employee uses the credit card to buy private goods and services in Year 2, the whole amount will be taxed through payrolling in that year without taking into account any amounts made good. This prevents the employee from delaying payment of tax as happened in Year 1.

You may need to recalculate the taxable amount.

Employee’s tax exceeds 50% of their pay

Employers must not deduct more than 50% in tax from an employee’s pay. This is called the overriding limit and ensures that employees aren’t left with too little pay to cover their living costs.

In some circumstances a high value benefit or expense, combined with low pay, could mean that the employee takes home little or nothing. This might be where an employee is being paid Statutory Sick Pay.

You’re allowed to stop payrolling benefits if necessary where deducting the tax for the benefit means that the tax payable will exceed 50% of the employee’s cash pay.

You have two options:

Option 1

You can exclude the employee from payrolling using the online service. If you exclude them for the rest of the tax year, the benefit they receive will be reintroduced into their tax code. Your employee should check that the amended code includes the correct amount of benefit so that they’re not overpaying or underpaying tax.

You’ll need to send a P11D after the end of the tax year for the excluded employee. The amount on P11D and any tax already paid through payrolling will be included in the employee’s tax calculation after the year end.

If you want to restart payrolling in the next tax year, you will have to wait until after you have sent your P11D, as it’s a trigger for amending tax codes. To restart payrolling, you can review the employee exclusion list and remove the employee.

Option 2

You can keep the employee in payrolling and carry forward the taxable amount of the benefit into future pay periods in that tax year.

Example:

An employee is paid £1,000 per month and their tax code is 1060L.

They have a car benefit which adds £4,000 to their taxable pay in September, meaning they have a taxable pay of £5,000 for September.

You use the tax tables to work out the tax due to deduct. Under tax code 1060L this is £1116.25.

You can only deduct up to £500 in September (50% of their salary £1,000).

The uncollected tax of £616.25 is carried forward to the next payday.

The total taxable pay to date in October Full Payment Submission (FPS) includes the full benefit.

In October up to £500 tax can be collected and the remaining tax outstanding on the benefit and on October’s salary will carry forward to November payday.

If there are insufficient pay periods to recover the uncollected tax, then once the final FPS is made, any underpaid tax will be included in an end of year tax calculation and sent to the employee by HMRC.

Changes affecting benefits and expenses

If things change, such as an employee leaving or a company car change, you’ll need to recalculate the taxable amount to go through your payroll. Find more information about these and other changes at Payrolling: changes affecting benefits and expenses.

Source: HMRC

Detailed guide: Payrolling: changes affecting benefits and expenses

Updated: Welsh language version of page added.

You can deduct and pay tax on your employees’ benefits and expenses through your payroll. This is known as payrolling.

If things change, such as an employee leaving or a company car change, you’ll need to recalculate the taxable amount to go through your payroll.

Employee leaves

The employee’s benefit will usually end on their last working day. You should calculate how much taxable benefit to payroll in their remaining paydays. To do this:

  • work out the revised taxable amount for the days in the tax year they had the benefit
  • take away the amount payrolled for the tax year to date
  • payroll the remaining amount over the remaining paydays

If the employee has had their final pay, you can’t payroll the remaining amount. You must tell HM Revenue and Customs (HMRC) so the tax can be collected directly from the employee.

Employee keeps their benefit up to the end of the tax year

You might let your employee keep their benefit up to the end of the tax year after they leave.

Take the amount payrolled for the paydays they’ve had away from the taxable amount for the whole year. This will give you the amount still to be taxed.

You’ll need to add this amount to any remaining payments of wages.

If the employee has already had their last payday, let HMRC know so they can collect the tax owed.

Example: employee gives notice in December that their last day is 28 February

The employee has a company car. The taxable amount is £5,200. This is £14.24 a day (£5,200 ÷ 365).

They will have had the car for 329 days to 28 February. 329 x £14.24 = £4,684.96 revised taxable amount.

£433.33 was payrolled each month (£5,200 ÷ 12). £433.33 x 9 paydays so far = £3,899.97 payrolled to date.

£4,684.96 – £3,899.97 = £784.99.

The balance of £784.99 should be payrolled over the remaining 2 paydays – £329.49 each payday.

Value of an employee’s benefit changes

An example of this could be where a new company car is provided, a premium for medical insurance changes or additional payments are made using a company credit card.

You’ll need to work out a revised taxable amount to payroll. To do this:

  • work out the old taxable amount, up to the day before the value changed
  • add this to the new taxable amount, from the date the value changed to the end of the tax year
  • take away the amount payrolled to date in the tax year
  • payroll the remaining amount over the remaining paydays in the tax year

If you’ve made your final Full Payment Submission (FPS), you can carry this amount over to the next tax year.

Example: employee gets a new company car on 1 August

The original taxable amount was £4,800. This is £13.15 a day (£4,800 ÷ 365).

There were 117 days to 31 July, before the value changed. 117 x £13.15 = £1,538.55 taxable amount before the change.

The new taxable amount is £6,000. This is £16.43 a day (£6,000 ÷ 365).

There are 248 days left in the tax year. 248 x £16.43 = £4,074.64 taxable amount from the date of the change.

The total taxable amount over the whole year is £5,613.19 (£1,538.55 + £4,074.64).

£400 was payrolled each month (£4,800 ÷ 12). £400 x 4 paydays so far = £1,600 payrolled to date.

Total taxable amount £5,613.19 – £1,600 leaves £4,013.19.

This should be payrolled over the remaining 8 paydays – £501.64 a month.

Correcting the taxable amount

If you used the wrong taxable amount by mistake, you’ll need to recalculate the amount to payroll. To do this:

  • work out the correct taxable amount for the full tax year
  • take away the amount payrolled to date in the tax year
  • payroll the remaining amount over the remaining paydays

If you have already submitted your final FPS, you can carry this amount over to the next tax year.

Example: mistake with company car value

The original taxable amount was £4,800. The employer realises after 4 months that the correct value is £6,000.

£400 was being payrolled each month (£4,800 ÷ 12). £400 x 4 paydays so far = £1,600 payrolled to date.

£6,000 – £1,600 = £4,400.

The balance of £4,400 should be payrolled over the remaining 8 paydays – £550 each payday.

Changing the number of paydays

You might need to change the number of paydays, for example, because an employee changes from weekly to monthly pay. To recalculate the amount to payroll, you need to:

  • work out the taxable amount of the benefit for the whole year
  • take away the amount already payrolled
  • payroll the remaining amount over the remaining paydays

Example: employee changes from weekly to monthly pay at the end of November

The employee has a company car. The taxable amount is £5,980.

£115 was payrolled each week (£5,980 ÷ 52). £115 x 34 paydays so far = £3,910 payrolled to date.

£5,980 – £3,910 = £2,070.

This should be payrolled over the 4 monthly paydays from December to March – £547.50 a month.

Change means the tax payable is more than 50% of the pay

If deducting tax for the recalculated benefit means the employee’s tax will be more than 50% of their pay.

Carrying forward a change to the next tax year

If you’ve made your final FPS, you can carry forward the amount that hasn’t been payrolled to the next tax year.

Add the amount still to be payrolled to the first wage payment in the next tax year.

If any change means the taxable amount has reduced, the employee will pay less tax or get a refund.

For Self Assessment, HMRC will accept the figures reported by the employee, where they agree with the employer’s action to carry forward the benefit payrolled in the following tax year.

Class 1A National Insurance contributions payable on the benefit can’t be carried forward to the next tax year. These are payable by 19 July after the tax year end.

Employee has left and no further paydays to payroll the benefit

If an employee has left but there is still a part of the benefit to be taxed, you have 2 options. HMRC will contact the employee for the unpaid tax, whichever option you choose.

Option 1: include the balance in your FPS

Report the taxable amount in taxable pay to date in your FPS and tell HMRC that the employee has left if you’ve not already done so.

Option 2: include the balance on form P11D

Include the untaxed balance on form P11D for the period that the employee had the benefit that wasn’t included in payroll.

Source: HMRC