Geraldine Browne provides food for thought as employers prepare to report end-of-year expenses and benefits.
At the time of writing, I am adjusting to working from home and seeking the best working station in the house (I lost). Much of my time is spent assisting clients with queries on the UK Government interventions introduced to help businesses survive in this challenging time. The most common questions relate to furloughed workers as companies struggle to maintain productivity.
It is difficult to choose a topic for this article amid the human tragedy unfolding before us on a global scale. As this article will publish in June, employers will be gathering the necessary information to complete Forms P11D and share scheme reporting for the year ended 5 April 2020. For this reason, I will focus on P11D reporting and consider the changes employers face in benefit-in-kind (BIK) reporting in light of the coronavirus emergency.
The due date for P11D reporting is 6 July 2020 for BIK provided for the year ended 5 April 2020. While this may have been delayed in line with other announcements from HMRC, the preparation process will nevertheless be the same.
What do I need to file?
If the employer paid any benefits and/or non-exempt expenses, or if they payrolled any BIKs, a P11D (B) form must be filed. The employer must include the total benefits liable to Class 1A, even if some of the benefits have been taxed through payroll.
Employers are also required to give employees a letter informing them of the benefits that were payrolled and the amount of the benefit.
What do you need to include on the P11D form?
Taxable benefits typically include private medical and dental insurance, company cars, and gym membership, for example. HMRC has published a useful guide for P11D completion, which is a good starting point.
Company cars and vans
Employers are required to disclose the company car BIK for the full tax year where it is made available for the entire period. The question has been asked as to whether an employer can reduce the BIK value since employees have been asked to remain indoors and business travel in a company car ceased temporarily from March 2020. If an employee is furloughed and the vehicle remains at the employee’s home, the car is seen as being available under the current rules.
At the time of writing, HMRC has not yet issued formal guidance on this matter. There have been suggestions that HMRC may accept that company cars will not be deemed available for BIK tax purposes where they are ‘virtually’ handed back by returning keys and fobs.
It is worth reminding ourselves of the rules regarding the cessation of the car benefit. The benefit may cease, but remember:
- The car must be unavailable for at least 30 days to pause or cease a company car benefit; and
- HMRC will accept that the car is unavailable to the employee if it is broken down and has not been repaired or if the employee does not have the keys.
If you have not already considered the company car policy, it is worth seeking advice in this area.
Taxable expenses when working from home
If employers provide a mobile phone without restriction on private use, limited to one employee, this is non-taxable. If the employee already pays for broadband, no additional expenses can be claimed. If broadband was not previously available in the employee’s home, the broadband fee paid for by the employer may be provided tax-free although in this case, private use must be restricted.
Laptops, tablets, computers, and office supplies will not result in a taxable benefit if mainly used for business.
If the employee purchases a desk and chair and seeks reimbursement from the employer, this will be viewed as taxable, and you may wish to include this in a Pay-as-you-earn Settlement Agreement (PSA).
Some employers may provide employees with an allowance for additional expenses incurred in connection with working from home. This was increased to £6 per week from 6 April 2020 and can either be paid to the employee or reimbursed to them.
Businesses and the economy are facing unprecedented financial pressure. It is worth reviewing your current benefits and expenses to identify ways in which you can reduce the cost to your business and reduce the taxable benefit to the employee. With many employees now furloughed and under severe financial pressure, any assistance an employer can provide to increase net pay will be welcome.
Geraldine Browne is Tax Director at BDO Northern Ireland.
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