Submitted by Sestini & Co
| on Tue, 07/12/2016 - 8:00 | In Accounting and systems
From April 2016 there’s been a shake-up in the way that benefits in kind are recorded and reported.
Employers don’t have to report certain routine employee expenses to HM Revenue & Customs anymore – these are known as exemptions and have replaced the system of applying to HMRC for ‘dispensations’, in the absence of which those benefits previously had to be reported on an employee’s form P11D. For these exempt benefits any relevant tax and national insurance (for example, if there is a personal element to the expense) can be completed through payroll instead.
What can you include in exemptions?
- Business travel
- Phone bills
- Business entertainment expenses
- Uniform and tools for work.
However… to qualify for an exemption you must:
- Pay back the employee’s actual costs
- Or pay a flat rate to your employee as part of their earnings (at a benchmark rate where there’s no need to apply for an exemption or at a special ‘bespoke’ rate approved by HMRC – which you do need to apply for and which is valid for up to five years from the date agreed.)
All other expenses and benefits must be reported to HMRC as normal.
Who can benefit?
Companies which have more than one employee can benefit as HMRC guidance states that “your employees aren’t allowed to check their own expenses, so someone else within your company needs to do this to make sure they’re legitimate” – i.e. the expenses must be genuinely incurred and confirmed as such by a third party within the company.
- Make sure your employees keep proof of their expenses, such as receipts or bills, as you may need to check them.
- You must keep a record of all expenses and benefits you provide to your employees, including information such as date and detail of what you provided. For business travel this could include where and when the employee travelled, why they went and any relevant receipts.
- Make sure you have a system in place to check payments you make at benchmark or bespoke rates.
If you’d like to check the impact of the changes, call us on 01761 241 861 or email us. We will be pleased to advise you or to invite you into our offices in Paulton, near Bristol and Bath, for a consultation.