Tax update: HMRC benefits campaign

Published: Friday 14 June 2019

A number of our clients have begun to receive letters from HMRC suggesting that they could be providing benefits to employees that have not been reported and hence not taxed appropriately.

The two areas of focus currently appear to be on staff entertaining and private fuel.  

For staff entertaining, HMRC seems to be identifying companies where expenses have been included in the accounts but HMRC has not received a PAYE Settlement Agreement (PSA) or P11D forms reporting the benefit.

There are two key exemptions for staff entertaining; annual functions/staff parties below £150 per head and trivial benefits.  Although the letters that we have seen mention the first exemption, it seems to ignore that the trivial benefits exemption could apply where the cost is less than £50 per employee providing certain other conditions are also satisfied.

For fuel benefits, HMRC has identified where a company car has been provided to an employee but no fuel benefit has been reported. It is not uncommon for employers to provide employees with a company car but not provide fuel.  The tax cost where the employer provides private fuel often outweighs the cost of the fuel itself, so it is normally inefficient to do so.  It should be noted that if you do reimburse employees for business miles in company cars you must ensure the correct rate is used, otherwise you could unintentionally be caught by the fuel benefit charge.

In the cases that we have looked at so far, our clients have not misreported and therefore, it does appear to be a bit of a fishing exercise by HMRC.  If you do receive a letter, however, we would recommend professional advice is sought if you are unsure of your position and the potential tax implications