The remuneration of many directors and employees is made up of more than just a basic salary. This factsheet gives guidance on some of the main types of benefits and expenses which may have taxation implications.
Employers are required to notify HMRC of benefits provided to employees and directors by completing forms P11D and P11D(b) on an annual basis.
The deadline for filing these forms is 6th July following the end of the tax year and the Class 1A National Insurance contribution calculated on these benefits is payable by 19th July.
As a general guide, the penalty for late submission of the forms is £100 per 50 employees for each month that the return is late. There are more severe penalties for incorrect forms and so it is very important that you understand your responsibilities as an employer.
Below is a list of common types of benefits which are provided to employees. This list is not intended to be an exhaustive guide so please get in touch to discuss any issues you may have:-
Employer provided cars
The taxable amount is calculated based on a percentage of the manufacturer’s list price, the CO2 emissions of the car determining the percentage.
A separate charge applies where private fuel is provided, unless the employee reimburses the employer for all private mileage (including travel between home and work). The taxable benefit is based on a fixed figure (£25,300 for 2022/23) which is multiplied by the same percentage as above.
No benefit arises as long as the private use of the van is restricted to ordinary commuting only (travel between home and work).
If the private use is not restricted, the taxable benefit of an employer provided van for 2022/23 is £3,600. If fuel is also provided, an additional fuel charge of £757 applies.
Cheap or interest free loans
There is no taxable benefit if the total loans to an employee remain below £10,000 throughout the tax year.
For loans exceeding £10,000 (including overdrawn Directors Loan Accounts), the taxable benefit is the interest at the official rate (2% for 2022/23) which would have been payable on the loan, less any interest actually paid by the employee. There is no taxable benefit if the total loans to an employee remain below £10,000 throughout the tax year.
Medical Insurance & Gym Subscriptions
The cost of providing medical insurance and/or a gym subscription is a taxable benefit.
Payment of private telephone bills, including line rental charges, and mobile phone contracts in the employee’s name, will usually be a taxable benefit, although reimbursement of business calls is covered by an exemption.
There are some exemptions for job related accommodation but generally, the provision of accommodation gives rise to a taxable benefit, usually based on the market rent of the property.
Private use of company assets
The taxable benefit is calculated at 20% of the asset’s market value when first made available to the employee.
Any gift of cash is always taxable as earnings, subject to tax and NIC via the payroll.
Non-cash gifts are taxable on the employee, unless they are covered by one of the statutory exemptions (trivial benefits, long service awards, suggestions schemes).
Many employers choose to settle the employee’s liability in respect of these gifts via a PAYE settlement agreement (PSA).
Personal accountancy fees paid by the company will constitute a taxable benefit.
For help and advice on any of the matters raised, please call us on +44 (0) 330 024 3200 and talk to one of our friendly experts.