Announced in the Budget Red Book as part of the government’s long-term strategy to simplify the tax system for taxpayers and their agents, the government will deliver IT systems to enable tax agents to payroll benefits in kind on behalf of employers.

This will help to reduce admin burdens on employers and enable agents to support their clients more effectively.

Agents will be able to report expenses related to company cars, health insurance, travel and entertainment expenses, and childcare.

Currently employers have to report taxable expenses or benefits for employees to HMRC directly through payroll or at the end of the tax year. They also have report how much Class 1A National Insurance is owed on all the expenses and benefits provided and pay any outstanding National Insurance.

HMRC has already confirmed that it will require the minority of digitally capable employers who still submit P11D and P11D(b) forms (reporting employee benefits and expenses) on paper to use online forms from April 2023. It will then move to providing digitally capable employers with P6 and P9 coding notices solely using digital methods.

Expenses and benefits for each employee do not have to be reported at the end of the tax year if all expenses and benefits are payrolled.

In addition, employers must send HMRC a separate P11D for each employee provided with taxable expenses or benefits that were not payrolled as well as a P11D(b) form to report any Class 1A National Insurance.

There are penalties for non-compliance if employers carelessly or deliberately give inaccurate information in a tax return that results in not paying enough tax or over-claiming tax reliefs.