The report looked at how employers manage Benefits in Kind (BiKs) and expenses, with the aim of helping HMRC to increase the number of employers who payroll these; explore the roles and relationships within the PAYE system; and determine the impact of RTI on payroll companies.

Employers called for simplification of the PAYE system with the removal of paper forms and the ‘de-coding’ of tax codes. The suggestion was that this could be through the use of a digital online portal that allows all parties access to information, with HMRC owning and hosting the account.

Feedback from payroll companies found that although RTI has had a positive start, it was ‘not quite there yet’ and there were some problems, the biggest of which includes claims that ‘HMRC can incorrectly allocate submissions, take too long to return receipts and do not have a workable reconciliation process when submissions do not match payments’.

However, payroll companies warned that they had not yet experienced ‘end-of-year’ under RTI. On a plus note, it was felt that the removal of the P35 process would significantly reduce burdens, although some end of year processes remained and it was possible that there would not be big reductions in red tape.

On BiKs and expenses, the research found  that most employers treat P11D administration as procedural and do not question the process.

However, of concern to HMRC was the fact that most employers, and even payroll companies, said they were not aware that they could ‘payroll’ BiKs and/or expenses and there is confusion surrounding its meaning. The minority of employers that do ‘payroll’ BiKs and/or expenses reported advantages for themselves and their employees.

The report suggests that increasing awareness of ‘payrolling’ BiKs and/or expenses could increase take-up among larger or more complex employers, although the benefits for smaller companies were not so clear cut.

According to the report, many employers feel the goodwill demonstrated by employers to their employees is ‘a by-product of a state of affairs where employees do not understand the PAYE system, their role in it, or how their tax is calculated’.

As a result, PAYE’s current success can be attributed to the goodwill of employers, rather than high levels of employee awareness. While employers agree they deliver on behalf of HMRC, they do not want to be a partner to HMRC. Employers would prefer that employees be educated to handle their own tax matters.

The report is available at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/349041/report338.pdf