Understanding expenses and benefits

If your employees receive benefits and/or claim expenses, these may need to be reported to HM Revenue and Customs (HMRC) and tax and national insurance (NI) payments may need to be made.

To help you understand your responsibilities and obligations regarding employee expenses and benefits, we have created this brief guide. If you have any further questions, please do not hesitate to contact our commercial law solicitors.

What are taxable benefits and expense payments?

Employee expenses and benefits can include:

• The use of a company car
• Childcare vouchers
• Gym memberships
• Health insurance
• Travel (including a rail season ticket)
• Entertainment expenses
• Use of a company laptop or mobile phone in a personal capacity

What is P11D expenses and benefits?

For every employee that you have provided expenses and benefits, you will normally need to submit a P11D form to HMRC at the end of the tax year.

Furthermore, you must provide a P11D(b) form if:

• You have submitted any P11D forms
• You have paid employees’ expenses or benefits through your payroll
• HMRC have asked you to - either by sending you a form or an email

The P11D(b) form lets HMRC know how much Class 1A National Insurance you need to pay on all the expenses and benefits your employees have received.

If HMRC has asked you to submit a P11D(b), you can tell them you do not owe Class 1A National Insurance by completing a declaration.

When it comes to paying tax on employee expenses and benefits, this can usually be done through your payroll providing you have registered with HMRC before the start of the tax year (6th April).

A P11D form is not required if you are paying employee benefit and expenses tax through your payroll. However, you will need to submit a P11D(b) for NI payment purposes.

Get legal assistance from LawBite

Failure to pay the correct tax and NI contributions on employee expenses and benefits can result in penalties. If you have any questions about these payments, get in contact with our friendly commercial lawyers. You can book a free 15 minute consultation, just click ‘Get started’ below.

 

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Additional resources

• Understanding the increase in National Insurance contributions
• The National Minimum Wage in 2022
• What is a contract of employment
• What are the terms and conditions of a contract of employment
• Registering as an employer - what you need to know