It is that time of year again – when we are thinking about your P11Ds. We are pleased to provide you with this handy guide on benefits in kind.
What are benefits in kind?
Benefits in kind (BIKs) are benefits that employees or directors receive from their company which isn’t part of their salary package. Under general tax law most benefits are taxable remuneration and have to be reported to HMRC and any tax or NICs paid.
There is a wide range of benefits in kind – from company cars to private healthcare that need reporting to HMRC.
A main list of taxable BIKs, including:
- Company cars
- Fuel for a company car for the employee’s personal use
- Loans for rail season tickets
- Interest free loans to employees/directors over £10,000
- Home phones with personal use
- Private Health Insurance
- Clothing allowance that is not essential for the employee’s job role
- Provision of Living Accommodation
Non Taxable Benefits
A few examples where circumstances may mean no tax is paid include:
- Parties and similar functions for all staff, costing no more than £150 ‘per head’, including VAT and associated costs such as transport.
- Provision of one mobile phone where the employer contracts directly with the supplier. Any other contract or payment is taxable and NI’able and has specific treatment depending upon who the contract is with and how it is paid.
- Free or subsidised meals available for all employees. Working lunches are also tax free if available to all.
- Subscriptions for an individual who is a member of a professional body approved by HMRC.
- Car parking
- Approved mileage allowance payments for use of an employee’s car on business.
1st 10,000 miles 45p per mile
Excess mileage 25p per mile
Motorcycles 24p per mile
Bicycles 20p per mile
Passengers 5p per mile
- Business travel but not ordinary commuting. These rules are complex especially for regular travel to a ‘temporary workplace’ and if this lasts more than 24 months.
- Relocation expenses up to a value of £8,000, subject to specific rules.
There is a statutory exemption from tax and NIC for trivial benefits costing £50 or less. This only applies if the following conditions are met:
- The benefit cannot be cash or a cash voucher (Gift Vouchers are allowed)
- The average cost per person does not exceed £50 for each event
- The benefit is not provided through a salary sacrifice arrangement
- The benefit is not provided in recognition of services performed by the employee
To avoid smaller companies taking advantage of this, any benefits provided to directors or other office holders (or their families) have the exemption capped at a total cost of £300 per tax year.
Normal employees do not have this £300 limit but the exemption does apply to family or household members so if there is a function where partners are invited then each employee’s partner can share the £50 trivial benefit for the particular event.
If any of these conditions are not satisfied, the benefit is taxed in the normal way, subject to any other exemption (such as the annual staff function exemption). Importantly, if the cost exceeds the £50 limit, the whole of the benefit is taxed, not just the excess.
The rules around benefits in kind are complex and each example needs to be looked at based on its individual circumstances to see if any tax is payable by the employee and/or your company. There are many limits and exceptions within each of the options.
We will be pleased to assist in the review of the treatment of any expenses payments, which may not be covered above.
Reporting a benefit in kind
Benefits in kind are reported on a P11d form by the employer, not the employee.
If a company offers their employees any of the taxable benefit in kind examples listed above, they will need to be included on your P11d.
A company will also need to file a P11d(b) form, which summarises the individual P11d forms they have completed for their employees and how much National Insurance will need to be paid. A company has to pay NICs at a rate of 13.8% for the tax year 2021/2022 of the determined values of the benefits in kind.
The P11ds must be filled by 6th July 2022 for the tax year running 6th April 2021 to 5th April 2022.
P11d penalties for late filing
If you miss the deadline of 6th July your company will incur fines of £100 per every 50 employees per month, or part month, until payment is received. You will also be charged penalties and interest if you are late paying HMRC.
Inform each employee of the details being returned before the form is submitted to HMRC so employees can point out any mistakes.
If you do have any further related P11d queries, please get in touch and we can give you tailored advice on what your company needs to do to ensure compliance.
If you would like more information, please contact Edita Rendall or Paul Webb at email@example.com or your usual Dixcart UK contact.