A benefit in kind is anything you receive from your company which benefits you personally and is not wholly, exclusively and necessary to your business. You may be liable to pay Income Tax as an employee and National Insurance Contributions as an employer on a benefit in kind.
What you do need to report as a benefit in kind
Generally, benefits must be reported by an employer on a form submitted to HMRC known as a P11D.
Here are some examples:
Company car
When a company-paid vehicle is made available to an employee (or director) for the purpose of work and is also available for private use, then a benefit in kind tax is applied and subsequently needs to be reported on your P11D.
Company van
It is considered unreasonable to expect van drivers to store their vehicle in a depot overnight and fetch it before work every morning. This means that the commuting time in a van is considered a necessary business use and therefore incidental private use is ignored by HMRC.
Mileage allowance and passenger payments
Employees using their own vehicles are entitled to a certain amount of mileage cover, tax free.
Home as an office
If it is necessary for you to work at home and it is not just for the purpose of additional work being conducted at home, then you are entitled to £4 a week benefit cover without having to report on your P11D.
Director’s loans
Anything you withdraw from the company which is not a dividend or a salary and is over and above what you’ve personally put into the company is classified as a director’s loan and must be recorded.
Payments made on your behalf
You must pay a benefit in kind on the value of the covering cost for any settlement or payment paid for you personally on behalf of the company.
What you don’t need to report as a benefit in kind
Some benefits are tax free and therefore do not need to be reported on your P11D, this is either because:
- A benefit registers as a statutory exemption from tax, or
- They’re covered by a dispensation
Statutory exemption benefit in kind
Company mobile
You are allowed to provide each employee (including yourself as the director) with one mobile phone free of tax and National Insurance, to use for private and business use without having to record it on your P11D.
Annual event
You are entitled to host an annual event – most commonly a Christmas party – tax free, providing you meet certain conditions.
Health checks
Any employee of your limited company is entitled to one tax free health check in any given year.
Late night taxi fares
Your limited company can provide a late night taxi ride from work to home, providing you take the journey outside of regular working hours.
Childcare Vouchers
You may be able to supply each employee with up to £243 per month, tax free, childcare support, providing the employee meets certain conditions.
Trivial benefit
There is no monetary limit to determine what qualifies as a trivial benefit – it’s largely down to your personal judgement. To give an example, a seasonal gift or a standard bottle of wine would pass as trivial and would subsequently not be taxed.
Work-related training expenses
Any training conducted with the intention of improving the ability of an employee (or yourself) to do a current or future job at the company is completely tax free.
Supplies and services provided by your business
Supplies such as equipment, stationery and consumables provided to you to perform your duties are allowable for occasional private use, providing that it’s not significant, and that the primary focus remains business related.
What is a dispensation for benefits in kind?
You can apply to HMRC for dispensations, which can remove the reporting requirements for certain expenses and benefits.
Once granted, dispensations last indefinitely. However, HMRC reviews them regularly (usually at intervals of five years or less) to make sure that the conditions under which they were first issued still apply.
What’s covered?
The main benefits routinely covered by a dispensation are:
- Travel, including subsistence costs associated with business travel
- Fuel for company cars
- Hire car costs
- Telephones
- Business entertainment expenses
- Credit cards used for business
- Fees and subscriptions
Requirements for a dispensation
In order for dispensations to be made you must have certain systems in place to make sure that the claims aren’t excessive or for any disallowed items. Usually, this must be a person independent from the employee claiming.
