Employee benefit schemes are implemented by a large number of companies, usually as part of a remuneration package. Some employee benefits are paid in addition to a salary, perhaps as an incentive for the workforce or as a way to encourage health and well-being, like membership to a gym. The most popular employee benefits include car benefit, medical benefit, childcare vouchers and mobile phones.
All employee benefits are taxable and many are liable to class 1A National Insurance Contributions, payable by the employer. Benefits are non-cash benefits and may even be part of a salary sacrifice scheme. This is beneficial to both employers and employees, as employers may obtain a discount on the cost of the benefit which will reduce the payment. Employees will benefit if they intend to purchase and use the benefit regardless. For instance, an employee who intends to pay for medical insurance will have the benefit provided by his employer in return for part of his salary. He will pay far less tax than if he had received the salary.
Employee benefits aren’t taxable if they are provided to an employee who earns less than £8500 annually and therefore; doesn’t have to be reported to HM Revenue & Customs on form P11D each year. A form P9D has to be submitted for employees and directors earning less than £8500. Employers complete a form P11D for each benefit provided, including the cash equivalent. Class 1A National Insurance Contributions are to be recorded on this form, if payable. The form P11D has to be submitted to HMRC by 6th July following the tax year it applies to. For instance, a P11D which has details of employee benefits provided in 2010-11 has to be submitted to HMRC by 6th July 2011. A copy should be provided to employees, as the form may be required if the employee applies for a repayment of tax for that year.
There are numerous types of employee benefit schemes including accommodation, car benefit and fuel allowance, mileage payments, travel and subsistence, entertainment, childcare, cycle to work scheme, luncheon vouchers, employee loans and many more.
Car benefit is a complex benefit and can be provided to an employee for business use, private use or both. When a car is provided initially, the benefit has to be reported to HMRC on a form P46 CAR. This form has to be sent to HMRC each time a new car is provided or a car is replaced or the car benefit ceases. The form will be used to update the employee’s tax records.
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