Expenses and Benefits for Employers – what do I need to know?

As a UK employer, it is important to understand the rules and regulations around expenses and benefits for employees. Failure to comply with these regulations can result in financial penalties.

Here’s what you need to know:

What are expenses and benefits?

Expenses are costs that employees incur as part of their job, such as travel or accommodation expenses. Benefits are generally non-cash items that employees receive as part of their employment. These might include items like a company car or health insurance. But, they could also include the transfer of assets, goods, or services made available by the employer.

What do I need to report on a P11D form?

If you reimburse employees for work related expenses incurred ‘wholly, exclusively and necessary’ for the proper performance of their duties, these items do not get reported on P11D forms.

The P11D forms are used to report a benefit provided to employees by virtue of their employment. The P11D forms should report the value the employee has received; this might be the cash value, the market value, or notional cost to the employer. Subject to the type of benefit provided, the method of valuing the benefit can be different. If you are unsure how the benefit should be assessed, please speak with a suitably qualified accountant.

What are the deadlines for submitting P11D forms?

P11D forms must be submitted to HM Revenue & Customs (HMRC) by 6th July following the end of the tax year (5th April). You must also provide each employee with a copy of their individual P11D form by the same deadline.

What are the tax implications of benefits?

Most benefits are taxable and are subject to Income Tax, but some benefits can also be subject to National Insurance contributions. Whether national insurance applies is usually dependant on whether the BIK is a readily convertible asset. If you are unsure, please seek professional advice.

It is also important to remember that not all BIK are taxable – some benefits such as the provision of one mobile phone, onsite parking and a workplace nursery are specifically exempt by the tax legislation. Exempt benefits are not reported on P11D forms.

There are many exempt benefits, so if you are unsure, please seek advice.

In summary, as an employer, it is important to understand the rules and regulations surrounding expenses and benefits for employees. You should ensure that you report all relevant benefits on the P11D forms and pay any tax owed in a timely manner to avoid penalties. By staying informed and up to date, you can ensure that your business operates within the bounds of the law.

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