Darling's tax on benefit plans 'costly'

Plans unveiled in thepre-Budget report to simplify the tax treatment of benefits-in-kind could be hugely costly to manybusinesses, a payroll expert has warned.

Petra Deters, a director of Bral, a company thatprovides payroll and management accounting services, said plans to change the way tax is paid on such benefits could prove hugely complicated.

Last month the Chancellor, Alistair Darling, proposed that many taxpayers would no longer receive an annual P11D statement from HMRC, and would instead pay tax on benefits-in-kind through their company's PAYE system each month.

The P11D statementcovers benefits on whichincome tax and nationalinsurance may not have been paid – including private medical insurance, private fuel costs, phone bills and gym memberships. Taxpayers with a liability are then required to complete a tax return and settle what they owe.

Ms Beters said that while switching to a monthly system through which such tax is settled automatically might seem sensible, many businesses would not be able to cope with the work.

"A lot of payroll departments simply do not have the technical expertise to deal with P11D data and would have to incur additional costs, either through an upgrade of their IT systems or by outsourcing more work," she said.

A spokesman for HMRC said the new system would be voluntary for taxpayers. "Many customers would prefer not to have tocomplete a tax return when they don't really have to," he said.