The following article was drafted by a Tax Accountant based in London. The following article highlights the key issue of Benefits in Kind also know as P11D.
If you hire an employee in your business, you have many options for rewarding them in addition to paying salaries and wages. The most common choice is to offer benefits in Kind (BIK), also known as fringe benefits, and looking for a tax accountant in London?
Benefits in Kind has several different forms, offered in addition to basic wages and salaries or as an integral part of the package tailored to individual needs and preferences.
Offering benefits in Kind as a part of a remuneration package or alternative part may provide the taxable benefits for both employers and employees. Some benefits in Kind are free of tax. Others may be taxable and incur the national insurance charges, so it is necessary to carefully look at both tax implications and advantages before offering benefits in Kind to your employees. You can take advice from an accountant.ts in London.
Scope of Benefits in Kind:
HMRC demonstrates the definition of benefits in Kind; BIK is anything of monetary value that you can pay to your employees that is unnecessary to perform the duties. If you provide a vehicle to a delivery rider, a sales representative, or a field service engineer, HMRC will consider this benefit essential for their work.
The vehicle would not be considered a benefit in Kind unless the employee makes extensive private use of that vehicle. If you provide a car for an employee need to travel for official use, that vehicle will benefit Kind. Suppose an employee uses the car for both purposes. You can consult with your accountant through online portals because many online individuals provide online services to their clients.
Although many tax rules cover the different types of BIK fall into two major categories.
- Taxable Benefits.
- Exempt Benefits.
HMRC provides the basic guidelines of benefits in Kind on the government website.
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HMRC provides the list of exempt benefits (tax-free benefits), including
- Bicycles and cycling safety equipment
- Mobile phones
- Welfare Counselling
- Sports facilities
- Annual and Chris is Parties
- Work Buses
- Work to home transport provided, when an employee for late hours, sharing arrangements and disputed.
- Certain gifts
- Motorcycle, car, and bicycle benefits
- Goodwill entertainment
- Financial Benefits awards
- Encouragement Awards
- Suggestion schemes
- Long service awards
- Reimbursed training cost by the employer.
- Certain retaining costs
- Travel between home and work for disabled people
- Incidental overnight cost
- Additional payment to home workers for household cost
- Certain living accommodation
- Other employers-supported child care.
- Child care vouchers
- Playschemes and cost of nurses
- Health screening
- Medical checkups
- Medical treatments
- Expenses of providing a pension.
- Meal vouchers
- Subsided or free meals to employees
- Supplies, accommodation, and services on your business premises.
However, this seems like an opportunity to your employees. There are many exceptions and limits within each option discussed above. So, it pays to check tax rules on exempt benefits in Kind before offering them help. You can consult your tax complications to small business firms in London, and many online service providers are available to provide online services available.
HMRC was given the list of taxable benefits in Kind, including
- Holidays vouchers and holidays
- Cheap loans to employees more than 10,000 and interest-free loans.
- School fees of children.
- Private medical insurance
- Clothing allowance other than required for the job
- Rent-free accommodation provided to employees or charge rent less than market price and capacity is not essential for the job role.
- Fuel allowance for the company or personal car of the employee.
- Use of company car for personal use
Again, all the above rules are complex for a layman because they include many exemptions to reduce your tax liability. You can approach the online for those services.
As discussed, if an employer provides the vehicle to an employee who is essential to his job role, that is no benefit in Kind and does not attract any tax liability to an employee.
Suppose an employer offers a vehicle to an employee and allows the employee for both personal and business use. In that case, only private service will be a taxable benefit in Kind for an employee. If an employee made occasional business trips would have national insurance and tax liability based on the proportion of personal use.
The amount of Benefit in Kind will be based on the following factors.
- The registration date of the vehicle.
- The fuel type of cars such as Petrol or diesel
- The omission of carbon dioxide.
- The list price of the vehicle with any other accessories.
The taxable benefit of the company car will be reduced if
- The employee using it part-time
- The employee paying contribution to the employer for the cost of the vehicle
- The vehicle omits the lower Carbon Dioxide (CO2)
The taxable benefit of the electric or hybrid car will be calculated differently. If the vehicle omits carbon dioxide 1 to 5g/km, the value is based on the distance before its batteries recharge. This will be considered its electric range.
If an employee is disabled and qualifies for the specific rules, there are other tax benefits.
HMRC provided the government website information for the office vehicle benefits, and some tax calculators will help you calculate the vehicle benefits.
Calculation of tax liability:
The following discussion will benefit you if you own a small business or a limited company.
If you provide the benefits in Kind, the HMRC will consider the taxable amount. According to British tax rules Terminology, employees will pay the income tax on the taxable amount of that benefit, the cash equivalents.
The amount of tax payable by an employee will be based on the taxable income of the employee, 20% to 40% 0r 45%.
HMRC allocated the three different tax slabs to calculate primary, higher, and additional taxes. Your tax amount will also be according to your tax slabs.
Some taxable benefits in Kind, such as benefits paid in cash or vouchers, may also pay the additional amount of National Insurance contribution charges.
If you pay benefit in Kind to your employee, you will also pay the tax in the form of a National Insurance contribution of 13.8% taxable value of the benefit.
On the other side, the cost provided as a benefit in Kind in an allowable tax-deductible expense will help reduce your profits and your income tax or corporation tax liability.
Reporting tax on benefits:
As an employer, you responsible for confirming be that the employee has received the benefit in Kind; you report the HMRC by submitting the form P11D after completing the form. If you have a small business, you can hire a small business accountant in London or a limited company accountant in London if you own a small limited liability company.
Because this form includes a long list of all possible benefits, you can select your applicable benefit and record the value. The deadline for submitting the form is 6th July of the following tax year in which you will pay the benefit to your employee.
You also have to offer a copy of the form to the employee.
They can ensure your calculations and pay the correct income tax and National Insurance Contributions. Income tax and National Insurance contributions should be deducted through your payroll system.
You also have to submit the additional form P11D (B), which relates to the benefits of NIC you have to make. You will submit this same form date with P11D.
Planning Benefit in Kind:
We have the rules of benefit in Kind, which are highly complex. The benefits program will carefully pay what may seem like an attractive offer to an employee with unexpected tax implications. With the right plan, you can avail yourself of tax-efficient schemes and reduce your taxable income. You will reduce your tax expense and help you motivate and retain your employees. You can also attract new talent when you hire new employees.
Suppose you are looking for a small business accountant in London. In that case, you can hire an online service provider and a Limited company.
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They understand all the requirements of Benefits in kind administration and planning is very complicated and time consuming for businessman. Our team of small business accountants in London, Limited Company Accountant in London, can provide services and online accountant services at competitive market rates. Our team includes highly qualified professionals who will help you with employment-related tax issues. You can save your tax and increase the profitability ratio if you hire a professional accountant.
Our team will also help you make efficient approved packages and ensure 100% compliance with tax rules.
We hope this article will benefit you and contact us for our services. Would you please comment if you have any questions or queries about taxable benefits in Kind? Thanks for reading the article.