Supporting Guidance: employer compliance: guidance by subject: expenses, benefits and pecuniary liabilities: benefits in kind
In addition to cash payments an employer may provide his employees with benefits in kind, for example a car or private health cover.
A more detailed explanation of benefits in kind can be found at EIM21000.
Where you find that benefits have been provided to employees you should confirm that
- all benefits have been reported or payrolled accurately and correctly
- the correct relevant NICs due from the employer have been paid
- the correct PAYE tax and Class 1 NICs have been paid where benefits are payrolled.
Settlement of any tax and NICs found to be due is covered at COG915068.
Any benefits in kind provided to an employee or office holder need to be reported by the employer on form P11D, or an approved substitute return or schedule, by 6 July following the relevant tax year. Failure to submit P11Ds or report benefits accurately can lead to a penalty for the employer, see COG914060 and COG914080.
From 6 April 2016 employers can register to payroll most benefits and where this occurs the payrolled benefits do not need to be recorded on a P11D COG904295.
Some taxable benefits may be eligible for inclusion in a PAYE Settlement Agreement (PSA) if the conditions are met, see COG915210.
Benefits may also be provided to an employee as part of a scheme such as (from 6 April 2017) an Optional Remuneration Agreement (OpRA) COG913510
National Insurance aspects are covered at NIM13000CO where benefits in kind are liable to Class 1A NICs. Where Class 1A NICs is not applicable guidance under NIM01000CO (Class 1 NICs) or NIM18000 (Class 1B NICs for PSA items) should be referred to as appropriate.
NICs will only be due on the taxable benefit provided if the employee is insurable, although there may still be an employer obligation to pay secondary Class 1 NICs, and therefore Class 1A and 1B NICs, even if the employee is over the State Pension age NIM36000.
Note: Retired Former Employees
Most non-cash benefits provided to retired former employees are liable to Income Tax. More detailed information can be found at EIM15000 to EIM15438. For guidance on settling and recovering tax in these cases see COG915068.