Employee benefits range from gym memberships to bonuses. Some of the most common types of benefits and expenses include:
For a full list of benefits see Gov.uk.
The amount of tax which must be paid depends on the expense or benefit; some are tax free (eg mobile phones and meals in a staff canteen). In general, employers are responsible for reporting and paying taxes on employee benefits as part of PAYE (see below).
See Gov.uk to find out what has to be paid on the different types of expenses and benefits.
Businesses which have registered with HMRC before the start of the tax year can pay taxes on benefits and expenses through the payroll.
A P11D form must be submitted to HMRC at the end of the tax year for each employee who has received expenses or benefits - unless this is being dealt with entirely through the payroll.
Additionally, a P11D(b) form may be required if: P11D forms have already been submitted; employees' expenses or benefits have been paid through payroll; or HMRC have requested this. P11D(b) forms deal with any Class 1A National Insurance which is required in relation to expenses and benefits. If no Class 1A National Insurance is owed, a declaration needs to be completed.
PAYE tax and Class 1 National Insurance owed on expenses or benefits must be paid through the payroll every month. Other deadlines are:
HMRC may ask to see evidence of all accounting in respect of employee benefits and expenses, so meticulous records should be kept, including:
Records should be kept for at least three years from the end of the tax year to which they relate.
There are certain routine employee expenses which do not need to be reported to HMRC. These exemptions include:
In order to qualify for these exemptions, employers must be either paying a flat rate (see Gov.uk for details of this flat rate) to their employees as part of their earnings, or else they must be paying back the employees' actual costs.