Until tax year 2016/17 when employees didn’t earn more than £8,500 in a tax year they didn’t pay tax when they were provided with benefits such as company cars, private health care etc. so long as their total remuneration, including benefits, was below £8,500.
From 6th April 2016 any benefits provided to a ‘lower paid worker’ will now be taxed the same as employees. Hence, company cars will be assessed at a cash equivalent based on their CO2 emissions and their market value and many other benefits will be assessed at a percentage of their cost value.
Employees who have other income will see a tax increase if their total income exceeds the personal allowance, employers will be subject to employers national insurance at 13.8% on the value of these benefits.
Previously, when expenses were reimbursed to employees either a dispensation had to be obtained from HMRC, confirming that all expenses are 100% business related or, the expense reported on a P11D and a letter sent to HMRC by the employee confirming their claims were 100% business expenses. If this didn’t happen the employee was taxed on their reimbursed expenses.
To replace this cumbersome approach, with effect from 5th April 2016 an employer will simply need to ensure that if any non-business expense reimbursements are included in the benefits reporting on P11Ds or by pay rolling.
For our clients and other small businesses, this means that genuine business reimbursement can take place without unnecessary administration and concern about adhering to complex and detailed regulation.
As of June 2017 there are proposals to change some benefits which are currently tax free. For the time being and until the new government has got its act together there is a respite from these changes.
Giving staff benefits in any way beyond their salary or a payrolled bonus is fraught with danger. To be sure you keep safe from penalties for not reporting and paying tax and national insurance correctly always take professional advice.
If you need any further advice on any of the above please get in touch. You can call us on: 01273 882200 or search our blog for more free small business advice.
All details above were correct at the time of publishing - for more up to date information please
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