Benefits in Kind: What are the common ones we see in Agency businesses?
When it comes to managing your finances, we understand the importance of staying on top of your taxes, especially when it comes to reporting benefits in kind to HMRC. But what exactly are benefits in kind and why do they matter?
A benefit in kind is a non-cash perk offered by an employer to their employees or company directors. It can be anything from company cars to gym memberships and even home broadband. The catch? These benefits are taxable and must be reported to HMRC.
To make things a little easier for you, we’ve listed some common benefits in kind we see among our clients, so you know what to look out for.
Some of the most common benefits in kind include:
- Company cars
- Non-business travel expenses
- Gym memberships
- Private medical insurance
- Non-business entertainment
- Home broadband
- Mobile phones
- Accountancy fees for self-assessment returns
- Training expenses
- Loans to employees and directors
- Assets with significant personal use.
Most of the benefits above are fairly self-explanatory but a couple need a little more of an explanation. These are …
How exciting, you’ve bought yourself a new car! But it’s important to know that this perk comes with a price. The tax bill on this benefit in kind is based on the car’s list price and can be quite hefty (unless it’s an electric vehicle).
One of your friends might have told you they get around this by treating the car as a ‘pool car’ to avoid declaring it as a benefit in kind. However, if the car is kept at an employee’s home, chances are, they’ll still face a benefit-in-kind charge. If you’re in the market for a new car, make sure to check with us to see if buying it through your company is the better option for you.
If you pay for private journeys of your employees (this would include journeys to and from an employee’s regular place of work), this is considered a benefit in kind and needs to be reported on a P11d form.
Any non-business entertainment, such as staff entertainment, that is over and above the annual £150 per head allowance, is taxable on your employees as a benefit in kind. Not all food provided to employees however will count as a benefit in kind. It’s worth taking a look at our blog Food and entertaining: what can be claimed to find out what needs to be included in a P11d.
HMRC is very clear that if an employer pays for an employee’s existing home broadband, this would be considered a benefit in kind for the employee. This is even if the employee uses the broadband to work from home. The logic behind this is that the broadband will also be available for personal use.
If an employer pays for a mobile phone that is in the employee’s name, then that would count as a benefit in kind. However, if the phone contract is in the company’s name and is paid for directly by the company, then it would not count as a benefit in kind. There is a limit of one mobile phone per employee.
Your company can pay for training to build on an employee’s existing skills or to develop new skills. The training must be ‘necessary’ for work otherwise it may count as a benefit in kind. For example, paying for ski lessons for a digital marketer would count as a benefit in kind, however, paying for a training course to develop their time management skills would not.
Loans to employees and Directors
If an employee or a director has an interest-free loan from the company this may count as a benefit and kind and may be taxable.
Not all benefits are taxable
It’s important to remember that not all benefits in kind are taxable, and there are still plenty of tax-free perks you can offer your team.
Each year, benefits in kind must be reported on a P11d form, and employees will pay tax on their benefits while employers will pay National Insurance. However, there is a way to spread the cost for employees: payrolling benefits. This allows the cost to be spread throughout the year rather than being a lump sum at the end.
So, if you’re not sure if you’ve paid any benefits in kind, or you’re unsure how to report them, don’t hesitate to get in touch with us. We’re here to help you stay on top of your finances and ensure everything is in order.