Regular employment income is taxed under PAYE with employers being responsible for calculating, withholding and paying to HMRC appropriate amounts of income tax and national insurance. Businesses with employees will be familiar with this process.
Where a business also provides benefits other than cash remuneration to its employees those benefits in kind are also taxable, but the reporting and tax payment system is somewhat different.
Benefits in kind can take many forms, some typical examples being:
- Company cars, vans, and fuel
- Private healthcare insurance
- Low interest or interest free loans
- Staff entertainment, including social events
- Reward schemes with non cash rewards (cash bonuses being taxed like normal salary)
There are a handful of exceptions where such benefits are non taxable, including:
- Annual social events where the cost stays below a threshold
- Low interest loans below a certain value
- A mobile phone provided to an employee
- Monetarily ‘trivial’ benefits in kind
In general employers are required to report taxable benefits in kind to HMRC and their staff using form P11D by 6 July each year.
The employee is then taxed through their personal tax return (if they are already required to make one) or by adjustment to their PAYE coding notice.
In some cases employers will have been obliged to deduct National insurance (NI) in respect of the benefits in real time (via payroll) but in most cases NI will be paid by the employer at the time the form P11D is filed with HMRC.
There are a variety of further complexities including the ability for employers to complete a ‘PSA’ (PAYE Settlement Agreement – settling the tax on their employees’ behalf) or to ‘payroll’ the benefits in kind (taxing them through the payroll and avoiding the need for form P11D).
Clients of ours are able to use our P11D Checklist to help identify reportable benefits in kind so we can assist them in fulfilling their reporting obligations.
Should you have any questions on your P11D reporting or need any support, please call John Sheehan on 01462 687333 or email firstname.lastname@example.org.