What is a benefit in kind?

With the deadline for submitting forms P11d to HM Revenue & Customs, quickly approaching, I thought it would be useful to provide a quick summary to help employers understand the obligation.

A benefit in kind (BIK) refers to any non-cash benefit provided to employees that holds monetary value. These benefits are additional perks that go beyond regular salary and wages. Common examples include company cars, private health insurance, interest-free loans, and gym memberships. While these perks can boost employee satisfaction, they are considered taxable benefits by HMRC.

You may recall a previous #FF newsletter where we explored Trivial Benefits, which if managed correctly, do not need to be declared on form P11d. Another useful business expense that is not reported as a BIK is relevant life cover, paid by an employer, so speak to us or your financial adviser / insurance broker if you're not taking advantage of this.

So what does need to be included?

This is not an exhaustive list, but some common benefits provided by employers might include the following:

1.???? Company Cars and Fuel: If you've provided a company car to an employee, this must be reported, along with any fuel provided for personal use.

2.???? Health Insurance: Private medical insurance paid for employees should be included.

3.???? Interest-Free or Low-Interest Loans: Any loans provided to employees exceeding ￡10,000 must be reported.

4.???? Living Accommodation: If you provide housing for employees, the value must be included.

5.???? Gym Memberships: If you offer free or subsidised gym memberships, these are taxable benefits.

Other useful info...

Deadline

P11D forms need to be submitted to HMRC by 6th July 2024. If you are late in submitting, you’ll get a penalty of ￡100 per 50 employees for each month or part month your P11D is late. You will also be charged penalties and interest if you’re late paying HMRC

Class 1A national insurance contributions (NIC)

Many benefits carry a NIC charge, this is basically a substitute for the employer’s national insurance that would have been paid if the employee had received the same monetary value through payroll rather than as a benefit.

This payment has to be made by 22nd July (or 19th July if paid by cheque) and, as mentioned, penalties and interest can apply if you’re late paying.

Of course, if you are already ‘payrolling’ your expenses and benefits then you may have already paid all or most of the amount due.

Submission Options

There is software available that payroll professionals and accountants will use, however most SME's use the online forms available via their Employer Gateway (AKA gov.uk PAYE login)

If you need any support with selecting and submitting the correct forms, valuing the benefit, and calculating Class 1A NIC, please give us a call.