Expenses and benefits: third-party awards
What to report and pay
What you have to report and pay depends on what kind of third-party award your employee receives, and whether you arrange the award.
Cash and cash-exchangeable goods
The third party must deduct PAYE tax from the award and pay it to HMRC.
You must deduct Class 1 National Insurance on the combined value of the award and the PAYE tax paid on it by the third party.
Non-cash goods
If the third party arranges the award
They must:
- account for the tax due on the award - this should be done by entering a Taxed Award Scheme (see the technical guidance at the end of this guide)
- pay any Class 1A National Insurance due on the value of the award and on the tax paid on it
In some instances Class 1 National Insurance will be due instead, eg if your employee’s personal bills are paid on their behalf. In this case you will need to deduct and pay them.
If you arrange the award
In this case:
- the tax due on the award must still be paid by the third party
- you must pay any Class 1A National Insurance that’s due