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Guides: Employment Compliance

An Employer's Guide to Other Employment Compliance Issues

Employers' Guide Contents > Benefits in Kind

3. Benefits in Kind

Benefits in Kind

In addition to wages, employees may be remunerated through other benefits, typically such things as cars, health-care, cheap loans and so on. In addition benefits may be deemed to arise by the employer meeting or reimbursing expenses such as entertaining, travel, accommodation, fuel, subsistence, lunches, clothing, out-of-pocket expenses, parking, fares, certain mileages, home phones etc.

The legislation is very widely drawn and just about anything that could conceivably give rise to a benefit (whether it does or not) is returnable.  The only get-out from reporting (and then only for certain expenditures) is to obtain a dispensation from the need to return such details. But such a dispensation will only be granted where the Revenue are satisfied that the employee is only being recompensed for expenditure incurred in the performance of his duties, and that there are controls in place to check such expenditures and that no benefit arises.

Such benefits have to be reported annually on a P11D Return and are taxable on the employee. A failure to account for such items correctly is a common source of PAYE settlements following PAYE inspections.

If there is any item on the P11d for which the employee claims relief on the grounds that it meets the (strict) qualifying conditions to be treated as an expense of the employment, a claim must be made to the Revenue for tax relief.

We can prepare the P11D Returns for you, calculate any Employer’s Class 1A NI contributions due, assist you in making an application for a dispensation and prepare tax relief claims for your employees where appropriate.

Very low-paid employees, typically part-timers, have such benefits reported on a P9D but fewer of the benefits are reportable. Their PAYE coding number is usually reduced to give effect to the tax charge.

PAYE Inspections

The Inland Revenue have Inspection teams who routinely visit employers to check that PAYE is being operated correctly.  The detailed nature of many tax rules relating to employment matters (see above), together with frequent uncertainty as to their application, makes it difficult to avoid oversights and errors that can result in hefty settlements. The correct treatment of expenses and benefits is a common source of error as are employment status disputes.

If you are unfortunate enough to suffer problems as a result of such an investigation we are able to assist and advise you in reaching a settlement.

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Disclaimer

While we hope the above has been found to be useful it is intended only as a general guide, may not reflect the very latest developments in law, and cannot be a substitute for professional advice. We cannot accept any responsibility for loss occasioned to any person acting or refraining from acting as a result of material contained in this guide.