There are a number of employee benefits you can offer as an employer. Some of these will be taxable benefits, which are also known as Benefits in Kind (BIK).
These benefits are things like company cars, health insurance and gym memberships.
For these benefits tax is paid on the taxable value of the benefit. The taxable value of the benefit is also called the cash equivalent value, for most benefits this is the amount it costs the employer to provide. There are some exceptions. like company cars which we have covered in our previous post. (link post)
The tax due on BIK's is calculated differently to normal salary. Employees must pay tax on the taxable value, but they do not pay national insurance. Instead the employer will pay Class 1A national insurance at 13.8%.
Tax on these benefits is paid one of two ways, its either reported on a form P11D or processed through the payroll.
P11D's are forms completed by an employer and must be filed with HMRC by 6th July following the end of the tax year they relate to. For the year ended 5th April 2018 P11D's must be with HMRC by 6th July.
P11D's show the taxable benefit for each employee and the total Class 1A NIC due from the employer. HMRC will then adjust the employees tax free allowance and collect the additional tax due by amending tax codes. If the employees complete self assessment they will report the benefits on their tax return as well to ensure the tax paid is correct.
Employers can also register with HMRC to deduct the tax from employee expenses via the payroll. The benefit of this is that employers don't need to file P11D's, but they do still need to complete a form P11Db which is the employers part of the form.
For help understanding which employee benefits are taxable or completing this years P11D please get in touch.