UK Employer Reporting Obligations – Taxable Benefits

By Adam Dunnett, Director at ZEDRA

The Coronavirus pandemic has had a long term impact on working life, with employers providing special arrangements or adhering to ‘one off’ requests whilst their staff work remotely. For employers, this may have resulted in a range of new payments, allowances or benefits being provided to their staff that are very different to existing policies or prior years. As an employer, it is important you are aware whether these new arrangements require you to return certain information to HMRC as a ‘benefit in kind’ as part of your Form P11D filing this year. We have provided a summary below of some of the common areas that may be relevant for you:

COVID-19 Tests

Coronavirus tests provided by the government, as part of its national testing scheme, are not treated as a benefit in kind for tax purposes.

If you have provided antigen testing kits to your employees, outside of the government’s national testing scheme, either directly or by purchasing tests, these will not be treated as a taxable benefit and no further reporting is required.

Personal Protective Equipment (PPE)

If you provide any PPE to your employees to help manage the transmission of COVID-19, any payment made towards equipment (or direct reimbursement to the employee) will not be treated as a taxable benefit and no reporting is required.

Home Working

A key area for many employers is in relation to payments made to employees whilst they have been working remotely. Some of the common examples are:

1) Mobile phones and SIM cards (no restriction on private use)

If you provided a mobile phone and SIM card to an employee without a restriction on private use, this is not considered to be a taxable benefit for these purposes.

If, instead of providing a company mobile phone and SIM card, you choose to reimburse the employee for either the full amount or an element of their own personal phone contract, this is likely to result in a taxable payment. The tax treatment will depend on the structure of the contract and payments and what you have arranged with the employee. We would recommend you contact us so we can determine what action is required.

2) Broadband

If your employee already had a broadband contract in place and was meeting this cost personally, then no further allowance exists and any payments you have made towards this plan would be considered taxable. The specific tax treatment will depend on the circumstances and how these payments have been made. We would recommend you discuss this with us so we can determine what action is required.

If a broadband connection was needed by an employee to work from home and one was not already in place, then in most cases you can reimburse the broadband fee without this being considered a taxable benefit. The broadband would need to be provided for business use, with any private use considered insignificant.

3) Laptops, tablets, computers and office supplies

Where you have provided any of the above items directly to your employees to support them with working from home and they are being used predominantly for business purposes – with any personal use considered incidental – then this equipment will be considered a non-taxable benefit.

You may have had instances where you reimburse employees for office equipment they bought personally. Again, where the equipment was needed to assist the employee in their role, the reimbursement should not be considered taxable, subject to the usual rules around employee expenses.

HMRC does operate a working from home tax relief scheme which has been extended to 5 April 2022. This provides employees the facility to claim tax relief on certain additional household costs they are incurring as a result of their working arrangements. Certain costs that might qualify for relief are additional heating, water bills, insurance and broadband costs. From 6 April 2021, the scheme allows tax relief on these items up to £6 per week and requires the employees to make a direct application to HMRC. Alternatively, employers can pay this amount tax free to their employees via the payroll.

Meals

Whilst your employees were homeworking, it might have been common to provide them with some meals or regular food deliveries.

There are some exemptions that mean the provision of employee meals (paying for them directly or providing vouchers) can be provided tax free; however, these require the meals to be provided in the office to the entire workforce or via a workplace canteen.

This concession has not been extended by HMRC to cover employee homes, so this is an area which may result in some additional tax or reporting.

If you have provided any cash payments or allowances for employees to use towards purchasing a lunch or an evening meal at home, this should have been treated as earnings and operated through your company payroll so relevant withholdings could be collected. Where payments have been provided outside of the payroll, do let us know so we can advise on what action is required.

Meals provided to employees over the tax free trivial amount of £50 are likely to be considered taxable benefits. The value of the meals would normally be reported on the employee’s Form P11D, meaning the employees would be responsible for paying the tax on this benefit.

This may be something you wish to avoid. In this instance, employers do have the ability to elect to report certain benefits to HMRC via applying for a PAYE Settlement Agreement (“PSA”). The main benefit here is that it allows the employer to incur the tax arising on these benefits on behalf of the employees. An application must be made to HMRC, but not all benefits are permitted to be treated in this way.

Summary

The above is not an exhaustive list and has been designed to illustrate some of the common areas that could be relevant over the last year.

We would recommend that you review your specific circumstances and discuss these areas with us as part of the preparation of your Form P11D filing for the year ended 5 April 2021.