Most employers provide their staff with certain taxable benefits, but there is a way that those employers can also pay the tax and national insurance on certain taxable expenses or benefits on their employee’s behalf. In this article, Accountant Mike Purcell explains.
Usually, these gifts would not be tied to specific employee performance and therefore these provisions can be used. There are also some tax-free benefits in kind that can be provided to employees – watch out for an upcoming article on these!
Any gift cards, vouchers or other non-monetary gifts provided to staff related to their employment performance are usually subject to tax and national insurance. These would usually have to be put through your payroll and any tax and national insurance paid as normal by employee/employer.
However, in some circumstances, the employer can pay the tax and national insurance contributions on some taxable benefits or expenses to employees without the employee having to bear the tax and national insurance costs, which allows them to receive the full value. This can be achieved by completing a PAYE Settlement Agreement (PSA) with HMRC.
What does a PSA cover?Small gifts and vouchers (Minor or irregular and might include items such as small gifts not covered by the trivial benefits rules)
- Employee’s telephone bills
- Staff entertainment – e.g., a ticket to an event
- Non-business expenses while travelling overnight on business that are over the daily limits.
What is not included?
- Round sum allowances
- Loans to employees over £10,000
The main benefits if you have a PSA for these items are:
- No national insurance or tax to be paid by the employee
- They will not need to be processed through your payroll
- They will not need to be included on an end of year P11D expense and benefits form
- You will pay employer’s Class 1B in one annual payment to cover the tax and national insurance
If you have any queries about this, please contact the team at Oldfield Advisory, who will be able to help!
Any expenses or benefits which are classed as minor, irregular, or impracticable can be included in a PAYE Settlement Agreement (PSA). This will ensure any tax and national insurance is paid correctly in one annual calculation.
A PSA is a highly effective simplification of the expenses and benefits processes enabling you to reduce reporting requirements, ensure HMRC compliance is managed appropriately and help with employee reward, as they do not suffer any tax or NIC on items included in the PSA.
Oldfield Advisory can help with obtaining a PSA and the annual calculation required. Trivial benefits do not need to be included in a PSA.
For more information on how we can help you and your business with issues relating to taxable benefits or any other matter, please contact us at email@example.com or call 02476673160.
Please note: This article is provided for information only and was correct as at time of writing (04/04/22). Any lists and details provided above are not exhaustive and are not intended to be full and complete guidance. No action should be taken without consulting detailed legislation or seeking independent professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this article can be accepted.