Benefits in kind: reporting and paying tax

|

Most employers are currently getting their houses in order when it comes to reporting employee benefits and expenses ahead of the 6 July 2018 deadline.

At the end of the tax year, you may need to inform HMRC if any taxable benefits were handed out to staff over the previous 12 months.

These include:

  • Company cars
  • Health insurance
  • Non-business travel or entertainment expenses
  • Assets provided by an employer that have significant personal use.

Each taxable employee benefit will be calculated differently, depending on what type of expense or benefit you’ve provided.

Most taxable employee benefits can be deducted through payroll, as long as you’ve registered with HMRC before the start of the tax year.

Otherwise, you may need to submit the P11D form to HMRC for any taxable expenses or benefits that have not been deducted through payroll.

Even if you put employee benefits through payroll during 2017/18, you’ll still need to send a P11D(b). You’ll also need to send a P11D to show any benefits you paid that you didn’t payroll.

These forms enable the Revenue to calculate how much you need to pay in class 1A national insurance contributions (NICs), as well as how much PAYE is due from the employee on the benefit.

This is then normally collected from the employee by adjusting their tax code.

Employees who receive benefits in kind will have different tax codes. It’s important to get this right to ensure the correct amount of tax is paid, while an exemption system is in place for certain benefits which are not liable for tax.

These include costs related to travel, business entertainment, business credit card, fees and subscriptions.

What do you need to provide?

You’ll need to provide the following details:

  • Employer reference
  • Name of the employee receiving the benefit in kind
  • Employee’s date of birth
  • Employee’s gender
  • Employee’s national insurance number
  • All benefits provided to the employee.

How to file returns with HMRC

It’s safer and cheaper to file your P11D forms with HMRC online before the 6 July 2018 deadline.

While it’s still possible to send paper returns, the Revenue will check online returns and inform you of any errors so there’s less risk they will reject your submission if you file it online.

When to start preparing

An as employer, you should be thinking about doing this now as you still have enough time – just over 2 months at the time of writing.

Leaving it to the last minute could result in your employees paying the wrong tax and you being penalised, so it’s important to prepare early and get it right.

Late-filing penalties

The deadline for submitting your P11D forms is 6 July 2018.

There’s a penalty of £100 per 50 employees for each month or part month the P11D(b) is late, with interest also charged on late payments to HMRC.

The deadline for paying class 1A NICs is slightly later, on 22 July 2018 (or 19 July if paying by cheque), and financial penalties apply if you are late.