Where an employee makes a payment to the employer for the provision of a non-payrolled benefit in kind (BIK), the payment will reduce the taxable value of the BIK. Currently, there are different dates by which payments have to be made to reduce or remove the tax charge for different BIK. In some instances (eg Private medical benefits) payments have to be made by the end of the tax year while in others (car fuel benefit) payments can be made within a set time after the end of the tax year.
As announced in Budget 2016 and after subsequent consultation, legislation effective from April 2017, will be introduced to ensure that an employee who wants to ‘make good’ on any non-payrolled BIK, will have to make the payment to their employer by 6 July following the tax year in which the benefit was provided.
The changes are aimed at removing the ability for some individuals to gain advantages from delaying making good until an HMRC compliance investigation. The changes will provide some flexibility on whether to make good, while simplifying the arrangements and providing certainty for employers and employees over their obligations.