What are the implications of providing staff (or directors) with perks?
Did you know that if you provided your staff with perks (or benefits in kind (BIK) to use their correct name) in the tax year ended 5 April 2024 then many of them need to be reported to HMRC on a form P11D by 6 July 2024? Your employees will then pay tax on these benefits (via an adjustment to their tax codes) and you as the employer will also be taxed (class 1A national insurance which is payable by 19 July 2024).
What tax free benefits can I provide to my staff?
Some benefits don’t need to be reported on a form P11D (ie they are tax free perks), for example:
- A single company mobile phone (provided the contract is with the employer and not the employee)
- Pension payments (provided it is an employer contribution)
- Meals in a staff canteen
- Hot drinks and water
- Workplace parking
- Christmas parties if they cost under £150 per head and are open to all employees
- The provision of certain types of approved childcare
- Some types of life insurance cover (Relevant Life Policies)
What benefits need to be declared to HMRC on a form P11D?
The most common benefits that will need to be declared include (but are not limited to):
- Company car
- Private health cover
- Home phone / broadband payments if used privately also
- Vouchers
- Entertaining
- Gym memberships
- Loans for rail season tickets
What value is entered on a form P11D?
The value that is entered on a form P11D will usually be the cost to the employer although there are exceptions, for example:
- Company car BIK will depend on the CO2 emissions and original manufacturer list price of the vehicle – see HMRC special rules
- If an employer can purchase something cheaper than the employee is able to then it may be necessary to include the higher price
What are the tax implications of a form P11D benefit in kind?
- The employee will be taxed at their normal (highest) rate of tax through an adjustment to their tax code. As P11Ds are often filed part way through the tax year (and it may take HMRC some time to process) then tax codes can sometimes take a while to be adjusted and the employee may have to pay several months of tax in one go, particularly if it’s the first time they have received these benefits
- The employer will have to pay class 1A national insurance of 13.8% x the benefit (same rate as normal employers NI)
Do any other forms need to be filed along with a P11D?
The employer will also need to file a form P11DB along with form (s) P11D. This is the form that informs HMRC how much class 1A national insurance is payable and where the employer declares all necessary information has been provided to HMRC.
Can I outsource the preparation of my forms P11D to 360 Chartered Accountants?
Yes, our payroll experts can prepare and submit the forms (and calculate your class 1A national insurance liability) from as little as £25 plus VAT, per employee (subject to a minimum charge of £50 plus VAT). Please contact help@360accountants.co.uk for further information.
