P11Ds | Chippendale & Clark

What you need to know about benefits-in-kind tax & P11Ds

For some, benefits in kind can seem more trouble than they’re worth, involving additional forms and reporting to complete, and a complex set of rules that change depending on the criteria. But where tax-efficient options are available, it can pay to have benefits in the kind scheme that works for both you the employer, and your staff.

What costs are involved?

Non-cash benefits provided to employees on top of their salary are subject to benefits-in-kind tax. This is paid on the taxable value of the benefit, which is usually the amount it costs you to provide.

However, there are exceptions to the rule – and the criteria that apply to each benefit in kind determines the level of tax you have to pay.

What are the exceptions?

Some benefits are considered “trivial” and not subject to tax. They need to satisfy certain criteria, including being less than £50 in value and not presented as cash. Gift cards (if they can’t be exchanged for cash) also form part of the benefits in kind scheme, so if their value does not exceed £50 they too are a tax-free option.

Similarly, there are certain benefits that aren’t taxed, including contributions to pension schemes and bicycles provided for employees to travel to and from work.

Where the benefits-in-kind tax gets more complex is in situations where special rules exist for calculating the taxable value of the benefit – such is the case with company vehicles.

Can you make your company vehicles more tax-efficient?

It’s worth re-evaluating how you use your company car – you are only taxed on the proportion of the year you use it for. Likewise, if it is shared by several people and deemed a “pool car” then you won’t have to pay tax on it.

The value of the car, its CO2 emissions, and the type of fuel it uses all affect tax charges (electric cars are not subject to tax). However, if you really want a tax-efficient company vehicle it’s worth considering the use of vans and motorcycles.

A company van used purely for business journeys AND commuting, won’t incur tax. For vans used for private journeys, there is a standard value to pay of £3150, which generally works out considerably cheaper than the value equivalent of a company car. Similarly, the standard value of van fuel for private journeys is just £594 compared to hefty fuel benefit charges for cars based on their CO2 emissions.

For motorcycles, the rules are different again, charged at 20% of the purchase price. If you choose to use company motorcycles over cars, you can also save on your Class 1A National Insurance Contributions as these are based on the taxable benefit-in-kind tax – the lower that amount is, the lower your NIC costs.

How do you report benefits in kind?

As an employer you’ll need to complete P11D forms – you need to submit them to HMRC for each employee or director whom you’ve provided with expenses or benefits.

If an employee’s expenses payments or benefits have already been taxed through the payroll, you don’t have to complete a P11D.

Points to remember when completing P11Ds:

– It is essential you keep detailed, up-to-date records of all expenses and benefits you provide to your employees.
– If you have a significant number of employees that you need to account for, HMRC will accept a spreadsheet detailing the benefits of a kind, so you don’t have to complete a form for each individual.
– You should keep your records for 3 years from the end of the tax year they relate to.
– Miss the 6th July deadline and you’ll pay – £100 per 50 employees for each late month, with additional penalties and interest if you’re late paying HMRC.

If you need help completing your P11Ds, or are struggling to get your paperwork in order before the deadline, don’t panic – get in touch with one of our team at Chippendale and Clark for support and advice.

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