CHRISTMAS IS COMING! – NEW RULES FOR GIFTS TO STAFF
From 6 April 2016 new rules were introduced to allow employers to provide their directors and employees with certain “trivial” benefits in kind, tax-free.
The new rules are a simplification measure so that certain benefits in kind will not need to be reported to HMRC, as well as being tax free for the employee. There are of course a number of conditions that need to be satisfied to qualify for the exemption.
CONDITIONS FOR THE EXEMPTION TO APPLY:
• the cost of providing the benefit does not exceed £50
• the benefit is not cash or a cash voucher
• the employee is not entitled to the benefit as part of any contractual obligation such as a salary sacrifice scheme
• the benefit is not provided in recognition of particular services performed by the employee as part of their employment duties (or in anticipation of such services)
So this exemption will generally apply to small gifts to staff at Christmas or on their birthday.
Prior to this change in the rules, the benefit in kind would have had to be reported on the employee’s P11D form at the end of the year, or alternatively the employer would have dealt with the tax and national insurance under a PAYE settlement agreement. Under such an arrangement a £50 Christmas turkey to a higher rate taxpayer could end up costing the employer nearly £95!
Note that where the employer is a “close” company and the benefit is provided to an individual who is a director or other office holder of the company, the exemption is capped at a total cost of £300 in the tax year.
Please feel free to contact us if you are considering taking advantage of this new exemption.
We often get asked about what an employee or Contractor (who is an employee of a Ltd Company) can claim in the way of expenses while on business travel away from their normal place of work.
Firstly it is important to understand if the employee is away from their permanent place of work or at a temporary workplace. A temporary workplace is defined as “somewhere the employee only goes to perform a task of limited duration or for a temporary purpose”. The full rules are here: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/517266/490.pdf
A temporary workplace also has a 24 month rule that prevents it becoming long term. As soon as it becomes apparant that the assignment will go beyond 24 months the workplace ceases to be temporary.
Why is this important? Well employees are not normally allowed to claim tax relief for commuting costs or costs while they are at work. When on business travel or on travel to a temporary workplace they can claim tax relief for travelling costs and for costs incurred while they were away. These costs must be costs incurred, ie the money must be spent. If an employer pays someone for the cost of a hotel but they stay with a friend this payment is just treated as extra wages.
There is one additional allowance which is for incidental expenses on overnight stays. An employer can provide up to £5 a night while staying overnight in the UK and £10 while staying abroad for out of pocket expenses. Otherwise the payments must be for costs actually incurred.
All this means that in practice a Contractor on a one year contract can claim their travel costs (either the actual costs of public transport or the fixed mileage rates for a using a private car) and also claim the actual cost for lunch if they buy it while at the workplace. Round sum allowances are not allowed and as soon as a contract is extended over 24 months these claims will have to stop.
For any more information on this complex area please give us a call.
It’s P11d time of year again and for some businesses this will be the last year that they have to complete them.
For small businesses the area of employee expenses has always been one of the least understood and had some of the lowest compliance. Few small business owners are aware that up until April 5th 2016 if an employee of the Company did something as innocuous as pay for a train ticket for a business trip, and then get reimbursed for it from the Company, that payment should be recorded on a P11d even though there would be no tax consequence. To avoid this level of bureaucracy in the past it was possible to agree a dispensation with HMRC. These could either be individually agreed or there was an esoteric form called the P11dx which covered the standard ones that could be completed.
Since 6th April 2016 however the regime has changed. The P11d dispensation regime has ended and the associated benefits and expenses legislation has changed. The new legislation exempts expenses such as travel and subsistence from tax and NI as long as they are validated as legitimate expenses by the employer.
Additionally Companies may now “payroll” benefits such as Company Cars or Health Insurance. Unfortunately you have to register to do this before the start of the tax year to avoid doing P11d’s for that year. Full information on how to do this is available here: https://www.gov.uk/government/publications/payrolling-benefits-in-kind-draft-guidance/payrolling-benefits-in-kind
The combination of these changes should mean that P11ds become a thing of the past for most Companies. Some benefits will still need to be reported on a P11d though such as Interest Free loans from the company. Flat rate allowances will still need to be within HMRC guidelines or agreed with HMRC as well.
If you have any queries about employee benefits please do not hesitate to give us a call.
2016 is the year where the government has finally seen sense and changed the expenses dispensation regime. Previously if an employee had been reimbursed for a business expense such as a train ticket this should have been reported on a P11d even if there was no tax implication. To avoid this a dispensation could have been agreed with HMRC and there was a form P11dx to agree standard dispensations with HMRC.
From April 2016 this is no longer the case. Dispensations are abolished and certain expense reimbursements will just be treated as exempt from PAYE and NIC. Employers will be responsible for checking that the expense is an exempt expense and that the employee has actually incurred the expenditure. This means the P11dx is now history and the system works how many people would have imagined it already works!
There was a little used form P9d for employees who were paid under £8500. This has now been abolished too.
There is a new trivial benefit exemption of up to £50 an employee per benefit that does not need to be reported.
Lastly there is a resonably significant change in that most benefits (for example health insurance) will now be able to be put through the payroll removing the need to submit P11ds entirely for many employers.
Full details of the current regime is available here: https://www.gov.uk/government/publications/480-expenses-and-benefits-a-tax-guide
If you would like any help with employee benefits or payroll please do not hesitate to give us a call.