HMRC have advised that the interactive PDF service, commonly used by small and medium-sized employers, would not be available for use for 2021/22 submissions.

Employers who previously relied on the online End of Year Expenses and Benefits service need to consider their options now that the online form is not available for tax year 2021/22 and onwards. That service offered the following capabailities:

  • Interactive PDF capability enabling small to medium-sized employers (up to 150 employees) to create P11D forms for their employees
  • The capability to create, send and amend P11D and P11D(b) forms electronically or for printing and posting
  • The facility to create and submit a ‘Nil P11D(b)’, essentially saying to HMRC that there is no Class 1A National Insurance liability.

Payroll managers will know that tax year 2021/22 is not totally complete until employers have completed all of their P11D returns and made submissions to HMRC. This annual process includes the submission of form P11D(b) and payment of Class 1A National Insurance Contributions.

From three to two

Employers who do not payroll their benefits, which by-passes the annual P11D process, previously had three ways to submit returns:

  1. Via payroll software
  2. HMRC’s PAYE Online service (for submissions up to 500 employees)
  3. HMRC’s Online End of Year Expenses and Benefits service (for submissions up to 150 employees).

With the decision to retire the End of Year Expenses and Benefits service for tax year 2021/22, there are now only two ways for employers of any size to report and submit details of expenses and benefits for tax year ending 5 April 2022: via payroll software and HMRC’s PAYE Online service (for submissions up to 500 employees).

With short notice, employers and agents who depended on the interactive PDF service will have to consider which of the two remaining options suits them best.

Payroll software

HMRC provides a list of “recognised” free and paid-for software. The word “recognised” indicates that HMRC will accept online returns from them in the required format. However, the HMRC software list needs to be accompanied by the warning that not all software is the same.

Some payroll programs may have expenses and benefits functionality, some may not.

Using software can be an expensive option, especially if employers are using this in addition to software used to run their payrolls. Like anything, employers are advised to check the features of the software to ensure it meets their requirements within their budget. (P11d capability is included in Liquid Payroll).

HMRC’s PAYE Online Service

Moving to HMRC’s PAYE Online Service would be a progression, as the online service provides more functionality than the decommissioned one. For example, as long as the employer has signed up for and received a Government Gateway user ID, they can submit the P46(Car) online in addition to expenses and benefits returns.

The payrolling option

Once 2021/22 P11D / P11D(b) returns are submitted, the decommissioning could prompt employers to consider the move to payrolling expenses and benefits.

In its simplest form, payrolling is where an employee puts the taxable value of an expense or benefit through the payroll, the P11D obligation is avoided altogether. The tax liability is collected via the payroll and removed from the employee’s tax code. So, for example, if a benefit has an annual value of £1,200 and the employee is paid monthly, an extra £100 is added as a notional/non-payable item each month. The tax liability is collected via that payroll and it does not result in extra monies being added to net pay.

However, the payrolling option is not as simple in reality. Employers have to register to be able to do this in the first place and have to have processes in place to know the taxable benefit on a per-pay-period basis rather than obtaining the value once annually.

The decommissioning of a service used by many employers certainly poses questions for the submission of 2021/22 returns but also poses the question of whether the employer should make more radical decisions going forward.

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