Benefits in Kind and Expenses
Covid 19 has impacted on the annual P11D submissions for benefits in kind and expenses.
The Covid-19 lockdown has changed the way that many of us work. This will impact the benefits and staff support that employers provide.
Read on to find out what items will need to be reported on P11Ds for 2020/21.
- Home Working Costs
- Home-working Equipment
- Mobile Phone Costs
- Broadband
- Unused Company Cars
- Employer-provided Covid-19 testing for employees
- Travel and subsistence expenses – temporary workplaces
- Deadline
Home Working Costs
Where employees work from home as part of a home working policy, an employer can pay an un-receipted allowance of up to £6 per week (£26 per month) from 6 April 2020. This is to cover the additional costs of working from home.
Alternatively, HMRC has confirmed that employees may claim this tax relief directly from HMRC while the current situation continues.
Click HERE to find out more about claiming the Work from Home Allowance.
In either scenario, it is not necessary to record these payments on a P11D.
Home-working Equipment
There is a specific benefits in kind exemption which applies to ‘employer-provided’ supplies and services in the employee’s home. In order for the exemption to apply, there are two primary conditions which must be met:
- the sole purpose for the provision is to enable the employees to perform the duties of their employment, and
- any private use by employees is insignificant.
Here, ‘employer-provided’ means the employer arranges and pays for the item (ie, monitors, keyboards, desks and chairs, etc). The equipment remains the property of the employer, and should subsequently be returned. However, if ownership is transferred to employees, a taxable benefit will arise and must be recorded on P11Ds. It’s worth noting that the value of some second hand items may be minimal.
A Temporary Exemption
Under normal rules, if an employer reimburses the cost of items purchased by an employee, it’s a benefit in kind.
However, in May 2020, the Treasury announced the introduction of a temporary tax and national insurance contribution (NIC) exemption. This is to cover any home office equipment purchased by employees and reimbursed by employers due to the coronavirus pandemic. This measure applies retrospectively from 16th March 2020, and will continue until the end of the 2020/21 tax year.
To be eligible for this temporary exemption, the reimbursed expenditure must meet two conditions:
- the equipment is obtained for the sole purpose of enabling the employee to work from home as a result of the coronavirus outbreak; and
- the provision of the equipment would have been exempt from income tax under the existing exemption had it been provided directly to the employee.
Under this temporary exemption, a taxable benefit will not arise if the equipment is retained by the employee rather than being given to their employer.
Mobile Phone Costs
As employees will not have access to their work ‘desk’ phone, they may have to use their mobile phones more frequently during 2020/21.
For mobile phones provided by the business, no benefit arises and there are no reporting obligations. This is because the contract will be between the employer and supplier.
Here are a few circumstances where employees are using their personal mobile phones and the likely tax implications when making claims for:
- itemised business calls, texts and data only (and this is evidenced), the cost reimbursed is not taxable;
- their fixed call plan (say £30 all-inclusive calls, data, etc), the cost will always be taxable – through payroll.
- costs over and above the fixed call plan. Provided they can demonstrate that the additional cost relates to 100% business use, the cost reimbursed is not taxable;
- where there is no justification for the costs being claimed. Therefore the business use and personal use cannot be determined, the total claim will be taxable through payroll.
Broadband
What if an employee needs a broadband connection installed as a result of needing to work from home during the pandemic? Provided the business arranges this, then the costs are tax free and not reportable on P11Ds.
Already have an existing broadband connection? If it is not possible to split the business use and personal use then any reimbursement will give rise to a benefit in kind. This means that the whole payment will be taxable.
The same can be said for mobile phones. There will be no tax implications if the employee can split their bill and claim for the business use element. For example, additional data requirements, etc.
Unused Company Cars
Unfortunately, HMRCs guidance is that there is still a benefit in kind as they remain available for private use. Regardless of the Covid-19 lockdown restrictions. Strictly speaking they are still with the employee (regardless of whether or not the car is actually used).
HMRC did offer some help for those on hire contracts in place during the coronavirus pandemic. Where a hire contract has expired, HMRC will accept that the benefit ceases immediately. The keys must be returned to the employer/hire company (at the employer’s instruction) so that the vehicle cannot be driven.
Employer-provided Covid-19 testing for employees
The costs of such tests are not to be treated as a benefit liable to tax and NIC.
Similarly, the cost of PPE provided to employees relating to their work is also non-taxable. Therefore it does not need to be reported on P11Ds.
In contrast, where employers reimburse the costs of a normal flu vaccination, this is a reportable benefit in kind. Unless it is dealt with by way of a PAYE settlement agreement.
Travel and subsistence expenses – temporary workplaces
HMRC has advised that if an employee was furloughed when they were travelling to a temporary workplace, the period of furlough is classed as a period of continuous work.
A period of working from home will also be classed as a period of continuous work.
However, the workplace stops being temporary from the date that attendance is expected to be more than 24 months. Tax and NICs will then become liable and reportable on any payments of travel and subsistence expenses.
Deadline
The deadline for P11D submissions to HMRC is 6th July 2021.
How Onyx Accountants can help you?
Our dedicated P11D team are on hand to help! They are ready to collate all the information needed with the preparation and submission of your P11D Forms.
We can help to identify if the expenses incurred by employees working form home are exempt for tax and NI.
If you have any doubts about what should be reported on a P11D then we can help you.
By using Onyx Accountants and Business Advisors to undertake a review of your additional expenses along with your P11D submissions, you can be sure that a thorough review will be completed.
GET IN TOUCH WITH ONYX
If you have any queries, or want to discuss further, please give us a call; or e-mail us at enquiries@onyx.accountants for a FREE no obligation consultation.
Got any questions or queries? Our friendly team of tax specialists are happy to help. Just drop us a line! Call us on 0121 753 5522 or 01902 759 800.
