Rewarding staff with tax and national insurance efficiency

This is a very emotive area for employers and employees alike. Employers want to reward staff in a tax and national insurance efficient manner. The provision of Benefits in Kind is often seen as a perk but there are tax and national insurance consequences to consider. Some benefits can be tax free, for example mobile phones and interest free loans up to £10,000.

Here are some important questions you need to consider first to ensure we find the right package for you.

  • Do director shareholders pay themselves a bonus or a dividend?
  • Is it beneficial for employees to provide their own cars and claim for business mileage from the employer?
  • Are you unnecessarily increasing national insurance liabilities by having benefit contracts in the employee’s name rather than the employer’s?

The completion of forms P11D to declare Benefits in Kind is a very complex matter and mistakes can easily be made. There are penalties for incorrect P11Ds, if the forms are not submitted to HMRC or if copies are not given to staff by the deadline. We have an experienced and fully trained team to help with the completion of P11Ds.

HMRC Dispensations and Exemptions
In the past we have advised and assisted in obtaining Dispensation Agreements from HMRC, thus minimizing the need to declare certain benefits. From 6 April 2016 Dispensations no longer apply, but this is because certain benefits and expense payments are now considered to be exempt, and we can provide advice on this.

Payrolling of Benefits in Kind
Please note it is now possible to ‘payroll’ certain Benefits in Kind, so that the tax due is included in the payroll and collected on a real time basis. Any Benefits in Kind that are payrolled won’t need to be included in a form P11d, although it will be necessary to calculate the Class 1A national insurance position in the usual way, and submit form P11d(b) and Class 1A national insurance payment each year. Our tax team can advise further on this matter.