Draft legislation: The Income Tax (Pay As You Earn) Regulations 2017

Changes are required to the Pay As You Earn (PAYE) Regulations 2003 from April 2018 as a consequence of policy measures relating to Voluntary Payrolling and Optional Remuneration Arrangements originally announced at Budget 2014 and Autumn Statement 2016 respectively.

This technical consultation will be of interest to employers, employer representatives and payroll providers. HM Revenue and Customs (HMRC) has published these draft regulations together with a draft Explanatory Memorandum for a period of technical consultation.

Car Data Reporting Requirements

Legislation was introduced at April 2016 that provided for employers to choose to tax most Benefits in Kind (BiKs) through their payroll rather than at the end of the year. These BiKs are reported to HMRC though Real Time Information and remove the need for employers to submit forms P11D at the end of the year.

However, for company cars, we still need employers to provide data regarding the cars and when draft legislation for voluntary payrolling was published for consultation in July 2015, we advised that additional reporting requirements relating to car and car fuel benefit would be introduced for employers choosing to payroll car and car fuel benefit.

The changes to the PAYE Regulations set out what information employers are required to report and how it will be submitted to HMRC.

The Income Tax (Pay As You Earn) (Amendment No 2) Draft Regulations 2017 set out what car and fuel data information is required.

Optional Remuneration Arrangements

The Finance Act 2017 introduced legislation to remove the tax and employer NICs advantages of Optional Remuneration Arrangements also known as salary sacrifice arrangements. An Optional Remuneration Arrangement is where an employee gives up cash pay in return for a Benefit in Kind (BiK) which was usually taxed on an amount lower than the pay given up, or left untaxed. The new legislation specifies that now, where a BiK is provided in conjunction with salary sacrifice, the taxable amount will be the greater of the BiK calculated under normal rules or the amount of salary sacrificed.

As the amount of the calculation will be different under Optional Remuneration Arrangements the changes to the PAYE Regulations will clarify the taxable amounts that need to be reported either via Real Time Information, where employers are Payrolling BiKs, or at the end of the year for non-payrolling employers.

The Income Tax (Pay As You Earn) (Amendment No 3) Draft Regulations 2017 explain the new requirements.