Enjoying benefits from your employer without the tax bite

Ronzl Accountants

1st April 2020

Money Matters

Ronzl Accountants

By Ola Sulaimon

Ronzl Accountants

AT times, employers provide access of use of company assets or pay for services enjoyed by their employees. This is done as part of the employer's package to encourage, motivate and retain their team members.

However, when these items are provided, they are treated as company benefits and therefore taxable on the employee and the employer pays Class 1 national insurance on the cost of the benefit to the employer.

When an employer provides benefits to their employees, they have two responsibilities.

First, declaring to HMRC and then payrolling the benefit or providing the P11D form to their employees. If these benefits have not been declared, the employees would have to declare these to HMRC using the information on the P11D form provided by their employers.

Whilst some of these benefits are obvious to the employers and employees, some aren't that obvious.

So, what happens when the employer is not aware that they are providing a benefit to their employees?

It simply means that the declaration that should have been made to HMRC at the end of tax year for each of their employees that have been provided with benefits or expenses has not been made. These declarations should have been made by 6 July after the tax year and national insurance paid by 22 July after the tax year. When this is not done, there is a penalty of £100 per 50 employees for each month that the P11D form is late and interest if they pay late to the HMRC

For the employee, this would result in underpayment of tax which could lead to unplanned debt if this mistake has been made for several years.

Some of the things to consider when providing the benefit are:

* The cost of the benefit to the employer or the taxable benefit.

* Each of the benefits to the employees must be considered with the circumstances that relate to them.

* If the benefit is exempted from tax and national insurance.

* If the employer is not sure of the tax position of this benefit, they should seek professional advice.

To find out more contact Ronzl Accountants Ltd, 51 Billing Road, Northampton. Call 01604 965826 or see the website at www.ronzlaccountants.co.uk