Benefits in Kind

Introduction

Now that we have passed 5 April it is time to inform HMRC of any benefits in kind your business may have paid on behalf of its staff and/or directors in the 2024 tax year.

What is a benefit in kind?

Broadly, a benefit in kind includes goods or services provided to an employee for free or at a reduced cost. For companies, directors and other office holders are included. Partnerships and sole traders can be taxed on benefits provided to their staff.

Cash payments to employees are not benefits in kind as they should be taxed as earnings via the payroll. This includes bonuses paid for harvest or lambing for example.

Common examples of taxable benefits in kind include:

• Cars and vans available for private use by an employee or director
• Accommodation where the farmhouse is owned by a company
• Running costs where the farmhouse is owned by a company
• Running costs for workers accommodation
• Clothes provided to an employee which are not necessary for work purposes
• Staff meals or entertainment costing more than £150 per head per year
• Interest free loans exceeding £10,000
• Paying bills in the name of the staff member or company director, for example phone bills or car servicing costs

It's not all bad news - many benefits in kind are not taxable - but you do have to make sure you come within the rules.

Sole traders and partners in a partnership do not have to report benefits in kind, instead their taxable profits are adjusted for private use.

What tax is paid on these benefits?

Employees and directors pay income tax on the value of benefits in kind. This can be collected by adding them to a tax return or more likely via the payroll. Each employee would be issued with a new tax code after the submission of the forms to collect the tax due.

The business providing the benefit pays a Class 1A National Insurance at 13.8% of the value of the benefits provided to all staff/directors.

How do I inform HMRC?

Since 5 April 2023 all benefit in kind submissions have to be made online via the HMRC "PAYE online for employers" portal. For businesses who do not run a payroll they may need to allow at least 15 workings days to register for a PAYE online account.

The online process will generate the forms for the employer (P11D(b)) and those for the individual staff members (P11D).

The employer's form must be filed by 6 July 2024 and any payment of National Insurance must be made by 19 July by cheque or 22 July when paying online. Penalties of £100 per month apply to late filings.

How we can help

Although we cannot make the submission on your behalf we can assist you with reviewing your expenses for any possible benefits in kind, performing or checking calculations such as for car benefits and accommodation benefits.

If you would like our assistance with your benefit in kind returns this year please get in touch.

Disclaimer: The information contained in this note is of a general nature and is not a substitute for professional advice. Please speak to us to obtain specific professional advice before you take any action. No responsibility for loss to any person acting or refraining from action as a result of this note is accepted.