Where an employee gives something (usually a cash payment) to the person providing a benefit in kind in return for it, this is known as ‘making good’. The payment has the effect of reducing the taxable value of the benefit in kind, often to zero. This reduces the amount of the employee’s taxable earnings.
The measure sets a date of 6 July after the end of the tax year for making good on benefits in kind which are not accounted for in real time through Pay As You Earn (‘payrolled’). The taxable value, and the value on which Class 1A National Insurance contributions (NICs) are payable, will be reduced only if the benefit in kind is made good by that date. There are already dates in legislation for making good on benefits in kind which are payrolled.
Employees will still have the discretion to make good after 6 July but doing so will not reduce the taxable value of the benefit in kind.