An employer can provide benefits to an employee which may have a tax and national insurance consequence. If this is the case, then the employer is required to report this to HMRC.
How is it reported?
A P11D form needs to be prepared for each employee who is provided with a benefit. In addition, a P11D(b) form needs to be prepared which reports a summary of the total benefits provided by the employer and the class 1A national insurance due.
It is possible for the tax and national insurance on certain benefits to be collected via the payroll, but form P11D(b) must still be completed.
Below are some of the common taxable benefits that an employer might provide:
Company Car and Fuel:
An employer may provide an employee with a company car to use. If they are able to use the car for private journeys (which includes commuting to and from work) then a benefit in kind will arise. The benefit is calculated based on the list price and the CO2 emissions of the car.
In addition, if the employer pays for all of the fuel for the car (including the fuel which covers private mileage) a car fuel benefit in kind will arise. This is based on a fuel multiplier rate set by HMRC every year and also the CO2 emissions of the car.
Private Medical Insurance:
Often, employers will pay for their employees to be covered under a private medical insurance policy. Doing so is providing an employee with a taxable benefit in kind and the premium relating to each employee will need to be reported on a P11D form.
Company Van and Fuel:
Similarly with a company car, if a company van is provided to an employee and they are able to use it privately then a benefit in kind will arise. Unlike a car, ordinary commuting does not constitute private use for a van and incidental private use will not trigger a benefit in kind.
The benefit value is a standard rate set by HMRC. The van benefit rate for the entire 2018/19 tax year is £3,350 and the fuel benefit rate is £633.
Interest-Free/ Low-Interest Loans:
You may wish to help an employee by providing them with an interest-free or low-interest loan. If the amount of the loan exceeds £10,000, a benefit in kind is triggered.
The benefit value is calculated by working out the average amount of the loan outstanding during the tax year and multiplying that figure by the HMRC official rate of interest (currently at 2.5%).
You may wish to provide your employees with a benefit which will not attract a tax and national insurance charge. Here is a list of a few tax-free benefits to consider:
- Parking at or near the employee’s place of work;
- Interest-free loans of up to £10,000;
- Eye tests for employees who use visual display units;
- Bicycles for commuting and business travel;
- Workplace nursery;
- Annual events such as a Christmas Party with a cost not exceeding £150 per head (incl. VAT);
- Gifts costing no more than £50 per person;
- A mobile phone.
This list is not exhaustive so if you are interested in providing a particular benefit to an employee and want to check whether it will be tax-free, then please get in touch.
6 July – Deadline for forms P11D(b) and P11D to be submitted to HMRC.
22 July – Payment deadline for Class 1A national insurance (19 July if paying by cheque).