Yorkshire employers are being urged to prepare for major changes to the way Benefits in Kind are reported, with new rules set to bring more employee benefits into payroll reporting from April 2027.
Sheffield-headquartered accountancy firm BHP has highlighted the changes, warning that the impact could extend beyond payroll administration to areas including cash flow, employee communication and the wider management of staff benefits.
Under the current system, many taxable employee benefits are reported to HMRC after the end of the tax year using Forms P11D.
From 6 April 2027, HMRC plans to begin the first phase of mandatory payrolling for certain Benefits in Kind, including private medical insurance, company cars, car fuel benefits, vans and van fuel benefits.
Rather than reporting these benefits retrospectively, employers will need to provide information through payroll as the benefits arise.
Further Benefits in Kind are expected to move to mandatory payrolling from April 2028, subject to limited exceptions.
BHP says the transition could require businesses to rethink how information flows between payroll, HR, finance and management teams.
Employers that currently gather benefit information only at the end of the tax year may need to introduce processes that capture changes throughout the year instead.
The changes could also affect business cash flow.
Under the new regime, many National Insurance liabilities associated with Benefits in Kind are expected to move from an annual payment to more regular payments alongside payroll, meaning employers may need to reflect the impact within future budgets and forecasts.
Employee communication will also be important, particularly where the introduction of real-time reporting results in changes to monthly payslips or deductions.
Kyle Newton, Partner at BHP, has encouraged employers to begin reviewing their arrangements before the new rules take effect.
Businesses have been advised to establish which benefits they currently provide, understand where the relevant information is held and determine who within the organisation is responsible for ensuring changes reach payroll.
The firm has also suggested that employers use the transition as an opportunity to review whether their existing benefits packages remain appropriate and valued by employees.
While the reforms are intended to simplify reporting and improve the accuracy of tax collection, preparing systems and processes in advance could be essential to avoiding additional administration and compliance issues.
For Yorkshire businesses, the message is increasingly clear: April 2027 may still appear some way off, but the operational changes required could mean preparation needs to begin much sooner.
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