P11Ds and the Pandemic

This past year has certainly been unprecedented to say the least.  I don’t think anyone could have predicted such a change to the way that we live and work.  I think it is safe to say that every business will have been impacted by the pandemic in some way, shape or form.

One of the overwhelming changes that we saw were employees being required to work from home.  This may mean that some businesses picked up the tab for home internet connections, home phone bills, personal mobile bills, even utility bills as employees are now using these resources predominantly for work purposes. Other companies may have withdrawn the private use of items such as commercial vehicles due to the lack of work.

What may not have been considered is whether any of the above could affect the taxable benefits in kind position for employees.

What is a taxable benefit in kind?

Benefits in kind are non cash benefits that are either provided to an employee or paid on the employees behalf.  They can be anything that is used personally by the employee but the company pays the bill for.  They are often referred to as ‘perks’ or ‘fringe benefits’.

As the benefits have a monetary value, they must be treated as taxable income.  Almost as though the company are paying for the benefit for the employee instead of giving the equivalent in salary where tax and national insurance would be payable. 

There are many benefits that are caught within the rules.  The most popular are shown below:

  • Company Car
  • Private Medical Insurance
  • Gym Memberships
  • Company assets being gifted to employees
  • Personal phone bills (not to be confused with company mobile phone contracts)
  • Professional subscriptions
  • Mileage payments over the HMRC allowed rates

There are some benefits that are exempt, however the rules are extremely complex so please do check with our tax team should you have any queries.  Examples of exempt benefits are:

  • Car parking charges where the location is close to work premises
  • Company mobile phones (so long as the contract is in the company name)
  • Uniforms, safety clothing and safety gear such as hard hats
  • Any training that is work related
  • Staff entertainment (subject to specific rules)

Reporting requirements

Benefits in kind need to be reported on a form P11D and submitted to HMRC by the 6th July 2021.  A form is needed for each employee that has a taxable benefit. The employee will then be contacted by HMRC to pay the tax on the benefit in kind.

The company also needs to submit a form P11D(b) which calculates all the taxable benefits and states the Class 1A National Insurance due on the total.  There is a 13.8% national insurance charge on taxable benefits.  The payment for which needs to be made by the 19th July 2021 (22nd July 2021 if using faster pay)

Contact

If you need any advice or assistance with either determining if an item would be classed as a benefit in kind or in the preparation of your forms P11D please do not hesitate to contact Nicola Wignall on 01772 821021 or nicola.wignall@mooreandsmalley.co.uk