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HMRC’s "critical friend" takes aim at Employment Measures

In April 2026, two big changes affecting how employers process payrolls are due to take effect. The first relates to additional data collection, and the second to payrolling of benefits in kind. Both will require employers to change processes and procedures to supply HMRC with additional information closer to real time.

The Administration Burdens Advisory Board – or ABAB for short – have taken aim at both of these measures in their latest report.

Who are ABAB?

ABAB is an independent body, consisting of representatives from a range of business backgrounds and professions. Framing itself as a "critical friend" to HMRC, the group prepares a report of HMRC’s performance each year, based on feedback collected from its ‘Tell ABAB’ survey. In 2023-24, over 10,000 individuals and businesses responded to this survey. 

Reporting employee hours in payroll submissions

From April 2026, employers will be required to provide details not just of employee pay to HMRC, but also more detailed information about employee hours worked.

Like the ATT, ABAB has questioned the need for these provisions, which both bodies feel will increase costs with no tangible benefits to employers and with equally unclear benefits to Government.

In this year’s report, ABAB has called for the legal advice supporting the extension of these measures to be published as, in their view, the data requested is not needed for the purposes of administering the tax system.

You can find more details of the proposed measures, in previous editions of Employer Focus: Notifying HMRC of employees’ hours worked – all change but not just yet! 

Payrolling of benefits in kind

The ability to ‘payroll benefits’ – ie to collect tax due on benefits as part of regular payroll processes rather than via the P11D at the end of the year - has the potential to benefit both employees and HMRC. With tax collected on benefits during the tax year, it would reduce the need for P800 tax computations after the end of the year, which can catch employees out with unexpected demands. It could also potentially eliminate the need for 4.5million P11Ds.

The ability to payroll benefits has been an option for employers since 2017-18, but take-up has been low. Therefore the Government announced its commitment at Autumn Budget 2024 to mandating payrolling of benefits from April 2026.

While ABAB is broadly supportive of the changes, it has concerns about the speed at which the measures are being implemented. It also highlights that two benefits in kind (living accommodation and beneficial loans) cannot yet be payrolled and must still be dealt with using existing, annual processes.

ABAB would like to see solutions to bring all benefits within payrolling, and for HMRC to give itself, software providers and employers more time to adapt to the changes before they are made mandatory.

ABAB has called for Ministers to delay the mandation date and ensure that HMRC first enacts legislation to enable the payrolling of living accommodation and beneficial loans, along with publishing detailed reporting requirements and guidance for employers.

Overall view

The report is not purely focused on employer issues, with ABAB also looking at Making Tax Digital for Income Tax, and HMRC’s wider digital ambitions.

ABAB does not pull its punches, noting that “HMRC is under-resourced and operating on IT systems that are decades old.” ABAB says this is hampering HMRC’s ability to make necessary digital improvements, and the report highlights that paper-based processes are still being introduced for some new taxes and reporting requirements.

The ATT has been calling for more digital services – and for equal access to existing services by agents – for some years, so many of the points that ABAB raises will be recognised by employers and ATT members. The full report is available on GOV.UK.

 

This article reflects the position at the date of publication shown above. If you are reading this at a later date you are advised to check that that position has not changed in the time since.  

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