Benefits - Not just a Salary
What are you offering your employees?
In recent years most companies have tended to offer employees more than simply their basic salary for their job. Whether the added incentives come in the form of bonuses, flexible hours, company cars, expense accounts, childcare or medical insurance, employers must ensure that they comply with all the legal obligations that come with offering these rewards as it may be necessary to calculate and pay the tax and National Insurance contributions for these extra employee treats. Whilst many business-related expenses and benefits are exempt from National Insurance Contributions (NCIs), any that are used for personal or mixed purposes may not be exempt.
The responsibility for paying the NCIs on expenses and benefits usually falls with the employer, although tax payments are usually deducted from the employee’s wages once the value has been declared by the employer. For most benefits, the employer will simply need to fill in the P11D form from HM Revenue and Customs at the end of the year, and the tax will be deducted from the employee’s wages. However, there are some benefits, such as company cars, which are valued on a quarterly basis, for which employers use the P46 form.
It is important that employers remember that the Inland Revenue can carry out checks on companies’ records of all expenses and benefits so it is important to ensure that all paperwork is filed correctly.
For more information on which expenses and benefits need to be declared by the employer, or for copies of the P11D and P46 forms, please visit the HM Revenue and Customs website: http://www.hmrc.gov.uk/paye/exb-intro-basics.htm