According to HMRC’s Employment Manual, imminent changes to the way benefits in kind are valued where there is an optional remuneration arrangement (ORA) means that employers will need to update payroll software for P11D and P46 (Car) reporting.

An ORA is when the benefit in kind (BIK) is provided rather than a cash allowance, as part of a flexible benefit package with a cash option, or with a salary sacrifice arrangement.

Where there is an ORA, the taxable value is now the higher of the cash foregone or the taxable value under the normal BIK rules. This applies to all BIKs, including currently exempt BIKs.

Arrangements entered into before 6 April 2017 retain their old treatment, but arrangements entered into since 6 April 2017, or arrangements which have been varied or renewed are taxed under the new rules.

As a result, HMRC is making changes to the data which needs to be submitted and payroll software must be updated before 6 April 2018.