Benefits in Kind – Making Good

“Making good” is where an employee gives something (usually a cash payment) to their employer in return for a benefit in kind. Making good has the effect of reducing the cash equivalent of the benefit in kind, often to zero.  This avoids a tax charge arising on the benefit provided.

Many employers and professional bodies have complained that the current rules on the timing of making good benefits in kind are inconsistent. Also, as there is nothing in statute, this inconsistency has been abused by some employers.  This has prompted HMRC to review the existing rules and they are currently consulting on this.

There are inconsistencies on the making good deadlines as they differ depending on the benefit provided. Some benefits should be made good by the end of the tax year and some by 1 June following the tax year in question. The timing is also dependent on whether the benefit is dealt with through the P11D process or through payrolling benefits.

In the consultation, it has been suggested by HMRC that the end of the tax year should be the making good deadline for all benefits, except those that it is difficult to quantify for that deadline.

Here are some examples of the current deadlines for making good certain benefits:

End of tax year1 June
Private use of company car or van benefitsCar and van fuel benefits
Living accommodationCredit tokens
Non-cash vouchersBeneficial loans
Medical insurance
Loan of business assets

The consultation is due to end on 4 October 2016.

If you would like any more information on this subject or any other tax queries, then please get in touch. Our Tax Partners and Tax Managers have significant experience in dealing with Benefits in Kind, and would be happy to assist you.Benefits in Kind

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