Tax on Benefits in Kind
Benefits in kind are cash but more likely non-cash benefits given to an employee or director in addition to their salary and wages. Employers offer these benefits to attract and retain good employees. In addition, there can be tax advantages to benefits in kind.
Tax Free Benefits in Kind
Whilst the HMRC likes to close loopholes in relation to non-cash benefits given to employees by having employers fill out P11D’s, there are a number of benefits that remain tax free. Here are some of the more popular:
- Employer Contributions paid into an approved pension scheme. This is a popular benefit given to employees as payments are an allowable deduction from corporation tax.
- Subsidised canteen meals on the condition they are available to all employees
- Bicycles provided to employees for travel to work. This is in line with the popular cycle-to-work scheme although through this the employee will pay the employer back for the bike but still receive a tax benefit.
- Sports facilities on site
- Certain childcare arrangements are deemed to be a tax-free benefit in kind
- Work buses or subsidies paid to public bus companies to get people to and from work
- Work and safety clothing provided by an employer
- Genuine personal gifts for example wedding or retirement gifts although not including cash
What is a P11D?
For taxable benefits, a form P11D should be issued by the employer detailing the benefits and expenses received by employees and directors during the year. The form P11D should be given to individual employees who have received taxable benefits and needs to be submitted to HMRC, generally a couple of months after the year end.
An employer does not need to list benefits on a P11D if tax on these has been collected through the payroll. To do this an employer will include the cash equivalent value of the benefit on the employee’s payslip. This is known as ‘payrolling’ benefits.
Benefits accruing to ‘family or household’ of employees and directors should also be included on the P11D.
Taxable Benefits in Kind
Some common expenses and benefits that should be included on the P11D are:
- Cars or other assets transferred to the employee. These should be included at market value on the date of transfer
- Personal use of a company car is taxable
- Season tickets and reimbursement of costs for travel to and from work. Any reimbursement for travel required in the course of your work are allowable.
- Childcare costs that you pay yourself. There are tax benefits if employers provide vouchers or provide childcare facilities on site.
- Accommodation costs and other household expenses paid by an employer-provided by an employer are taxable unless any of thee apply 1) it is necessary for you to live in the accommodation 2) it is customary in this type of job for an employer to provide accommodation 3) it is required for security reasons. The cost of hotels and temporary accommodation required to perform your job can be provided tax-free.
- Interest-free and cheap loans
- Vouchers provided to obtain goods and services with the exception of childcare vouchers
If you are registered for self-assessment then you will need to include details of any benefits in kind, from your P11D, on your self-assessment tax return.
We provide assistance with P11D submission as part of our payroll service.