Introduction Background Note
9.This section introduces new powers for the Commissioners to make regulations to authorise employers to deduct or (repay) income tax through PAYE on the benefits that they provide to their employees (“payrolling”).
10.At Budget 2014 the Chancellor announced a number of measures aimed at simplifying the administration of employee benefits and expenses. This followed the Office of Tax Simplification’s (OTS) review of employee benefits and expenses.
11.The package of four measures consisted of the following:
	Abolishing the threshold for the taxation of benefits for employees who earn at a rate of less than £8,500 a year (‘lower paid’ employments), with action to mitigate the effects on vulnerable groups disadvantaged by the reforms;
	Introducing a statutory exemption for trivial benefits;
	Introducing a system of collecting income tax in real time through ‘payrolling’ of benefits; and
	Replacing the expenses dispensation regime with an exemption for paid and reimbursed expenses.
12.This dispensation to allow employers to payroll their employee’s benefits and expenses voluntarily replaces an existing informal practice, where some employers operate payrolling but still have to comply with tax rules that require them to complete a form P11D (return of employee benefits and expenses) at the end of each tax year for each employee. The regulations will disapply that obligation for employers who payroll reducing their administrative burdens.