Update - HMRC has since confirmed a phased rollout, not one blanket date. Company cars, car fuel, vans, van fuel and employer-provided medical benefits become mandatory to payroll from April 2027; most other benefits in kind follow from April 2028.

Read the full breakdown here: Mandatory payrolling of benefits in kind and expenses – interim guidance and legislation

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To payroll, or not to payroll.  That decision was to be taken out of our hands, but it is now delayed until April 2027, for now - see MTD for income tax.

Practical issues which HMRC are aware of:

• Some benefits will still have to be declared annually, and not through payroll - such as Employee loans and Accommodation.
• HMRC’s guidance accepts that there are benefits of unknown value during the tax year, and therefore applying ‘reasonable estimates’ has been requested, with a top up or refund applied at year end.
• Some employees will have double tax, as they will be paying for last year with a tax code adjustment and this years benefits through payroll deductions - extensions on last years tax code changes can be applied for here, so as to spread the effect over a number of years, but the burden is on the employee to do this.  There continues to be the 50% overriding ceiling of deductions from an employee's pay.

Time will tell if HMRC finds a way to penalise errors, or if further delays will come.

As advisers, we’re largely in favour of the change, but only if the system is fit for purpose. Monthly recurring work, with contemporaneous records, is always preferable to one off work looking backwards more than 12 months.  Clients are also usually more accommodating of their invoices reflecting the work which is actually being done in the month.

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