Third party benefit providers are told by HMRC to prepare for mandatory payrolling of benefits in kind and expenses.
Third party benefit providers
Prepare for mandatory payrolling of benefits in kind and expenses.
The mandatory payrolling of benefits in kind and expenses is a significant data and operating model change for anyone supplying benefit information to employers.
Third party benefit providers can include:
- fleet providers supplying company car data
- private medical insurance providers supplying cover values
- voucher and benefits platform providers supplying taxable benefit information
- relocation and mobility providers supplying benefit details
Employers need earlier information from their benefit providers
Benefit information will be needed to support live payroll processes and payroll cut-offs.
For example:
- employers will need benefit information before payroll is processed
- employers and payroll teams will need structured data they can use without unnecessary manual re-keying
- changes, corrections, starters, leavers and benefit end dates will need to be identified and communicated to employers earlier
- late or incorrect data can affect an employee’s take-home pay and the employer’s Class 1A National Insurance contributions reporting
In order to support employers and payroll teams, providers should supply complete, standardised employee-level benefit data before payroll cut-off and have processes for validation, audit trails, error corrections, starters, leavers and in-year changes.
Benefit data is needed
HMRC indicate that benefit providers should make data:
- complete — all required data fields populated
- timely — available before payroll cut-off
- consistent — identifiers match employer records
- accurate — values and dates are reliable
- traceable — source and update history are clear
- correctable — errors can be fixed quickly
- machine-readable – at least in an .xlsx or .csv format instead of PDF or paper
They should also have processes to manage missing data.
Benefit providers are requested to tell their employer customers which benefits they support, what data they will supply, agree when it will be provided, what employers should check, and how corrections will be handled.
By April 2027, check that they:
- know which benefits they support
- know what information employers need
- can supply usable data before payroll cut-off
- can identify and correct errors quickly
- have tested employer hand-offs
- have clear escalation routes
- have guidance ready for employer customers
Employers and third-party benefit providers should plan ahead and think about what changes need to be made in order for payrolling to work as smoothly as possible for all concerned.
Third party benefit providers are not being made mandated reporters of benefits in kind.
However, the benefit remains taxable as an employment-related benefit even though the employer is not the person physically providing it.
Third party benefit providers are therefore not required to operate mandatory payrolling themselves but may need to provide employers with timely and accurate benefit information to support compliance.
PAYadvice.UK 10/11/2026