Offering benefits to your team? Here’s what you need to know about tax

Amidst today’s ever-competitive landscape, we’re seeing more and more business owners look beyond their basic remuneration packages to harness the best talent in their industries.

Benefits in kind are often a go-to option. Not only can they help you stand out in a crowded market for recruitment purposes, they can also raise engagement and retention rates with your current team too.

But with tax considerations to think about and updates to the reporting of benefits in kind, what do business owners need to know before offering and then implementing them?

What actually are benefits in kind?

Benefits in kind can come in all shapes and sizes. Simply put, they are perks which your employees receive from your business which can be used personally, and aren’t part of their pay package. As long as this perk isn’t related to the business’s purpose, it’s likely to be a benefit in kind.

Whilst some benefits are taxed, others aren’t. If reported incorrectly, or not at all, the perks you’re offering could result in HMRC issuing penalties. So, getting it right is crucial.

Which benefits are liable to tax? 

The list of benefits which you can offer your team is exhaustive. To give some context as to what’s out there, we’ve seen businesses offer their team a choice of over 50 benefits.

Some of the most common benefits which are liable to tax include (but aren’t limited to):

• Company cars
• Gym memberships
• Private health insurance
• Dental costs
• Cheap or interest free loans
• Non-business travel and entertainment expenses

How do you report a benefit in kind?

The taxable perks you are offering your team need to be reported on a P11d form, and a copy provided to the team member. It’s vital to do so, as the benefit in kind will technically increase the salary of the individual receiving them and there may be tax paid on them. While Class 1A national insurance is due on many benefits in kind, this will be paid by the business, but there will likely be a tax liability for the employee.  

The employer is also required to submit a P11d(b) form, to show how much national insurance will need to be paid on the benefits which have been provided.

It’s important to point out that some recent changes to these P11d forms have recently been implemented. So, if you have been submitting your own paperwork for years, now might be the right time for a refresher. Especially with the new tax year now being upon us, and time for submitting your P11d paperwork fast approaching - the filing deadline is in early July.   

What are the recent changes to P11d forms?

As of April 6^th this year, HMRC won’t be accepting paper P11d returns. Meaning that from now on, all reporting must be submitted digitally, unless you are a digitally exempt employer.

This is a welcome move, as it helps both businesses and HMRC to cut down on paper wastage, whilst also streamlining processes at the same time.

Whether you are a sole trader, partnership or limited company the new rules are applicable to all. The rules apply to all submissions for the tax year ending 5^th April 2023, and any amendments that need to be made for earlier years.  

While the deadline for the submission of 2022-23 P11ds is 6^th July 2023, the payment deadline for any Class 1A National Insurance is 19^th July 2023.

Supporting you with benefits in kind and their reporting

Benefits in kind can have a significant, tangible impact on your recruitment and retention rates, but it’s important to ensure that their reported correctly, for both you and the team.

The rules can be complex and each individual perk needs to be considered separately so we would always recommend consulting an advisor on the matter. This will ensure that you’re staying compliant, but will also save you time in navigating the rules by yourself, on top of the day-to-day running your organisation.

If we already prepare and submit your P11d forms, don’t worry – we’ve been doing all of this online for some time, so these changes will not affect you.

However, if you would like any further information about whether you should be submitting a P11d, or if you already do your own but would like help with how to submit your P11d online, please get in touch.