Do you know which employee benefits are non-taxable?

All employees are taxable on all the income they receive from their employment, this includes:

• Salary
• Benefits in kind
• Expenses payments

However, employees are entitled to relief for the full cost of any expenses they are obliged to incur as part of their duties including travel to and from certain locations. This is providing the journey is not ordinary commuting or private travel. HMRC will also not seek to deny relief for the cost of a journey, hotel room or meal simply because a less expensive alternative is available.

Tax relief is available in two ways:

1. Exemption - Where a payment or benefit in kind is exempt, employers do not need to report the amount to HMRC and employees do not have to claim relief:

• Approved mileage allowance payments
• A dispensation given by an HMRC Officer
• PAYE settlement agreements

2. Deduction - Where relief is available by deduction, the employer must report expenses payments or benefits in kind to the HMRC via P11D. Employees then need to make a claim for further relief to the HMRC office.

What is a P11D?

A P11D is a form used by employees to tell HMRC about the value of any 'benefits in kind' they have given an employee during the tax year. This means benefits or expenses that effectively increase your income, for example:

• a company car
• private medical insurance
• interest-free loans

An employee need only declare them if the employee has earned at least £8,500, this includes any additional income received through business expenses and benefits in kind, in the financial year, including the value of the benefits. The costs of benefits should be calculated and recorded and copies given to HMRC and the employee.

Non-taxable benefits

There are several benefits that are not normally taxable, even when an employee falls within the P11D category. The most significant are:

• Retirement benefits paid into an employee's pension scheme
• Access to pensions advice and information which is available to all staff – this has a limit of £150 per employee per year
• Free or subsidised meals on a reasonable scale which are available on your premises or in a canteen to all staff
• Drinks and light refreshments at work
• Parking provided at or near the workplace
• Childcare facilities provided for employees on your own or together with others, or childcare vouchers, up to a value of £55 a week - the care provided must be with registered child carers or approved home childcare, and it must be available to all employees
• In-house sports facilities
• Vouchers for eye tests and corrective glasses for VDU use
• Removal and relocation expenses - up to a certain limit
• One mobile phone for private use per employee, or non-cash vouchers for one mobile phone for private use (multiple phones provided prior to 6 April 2006 are still tax-exempt)

Source

National Insurance Contributions

Where an employer makes a travel payment which does no more than reimburse an employee for the full cost of business travel, there is no national insurance contribution due.

Where a payment reimburses more than the full cost the excess amount must be added to any other earnings the employee receives in the earnings period in which you make the motoring expense payment. Class 1 NICs are then calculated on the employee’s total earnings.

Reporting on P11D data

Keeping an accurate and current record of benefits in kind that should be declared on a P11D can be time consuming and not always possible. Expenses enables you to set up as many P11D categories as you require which logs the necessary data required to complete a P11D form.

As and when claimants add expense claims Expenses automatically checks whether you have classed the claim item as a P11D category and logs the relevant information.

This information can then be reported on using the Expenses reporting suite. This report shows the employee, P11D category and total amount spent on the category over the year. All reports can be configured to your own specifications allowing you to view and analyse all information you require.

To find out more about P11D’s or the Expenses reporting suite please contact Adele Briggs on 01522 881300 or click here.