The 6 July deadline for reporting employee benefits received during the 2020/21 tax year is fast approaching. With the COVID-19 pandemic resulting in a change of working patterns and behaviours for many employees, we have a quick recap of which benefits do and do not need to be reported, in particular those that may not have been considered or relevant in previous years.
Travel
Many businesses have supported employees with travel expenses during the pandemic, either because public transport services were minimised during lockdown periods, or as a result of Government recommendation to avoid public transport particularly by those involved in the care industry. This is a taxable benefit in kind unless it meets all five of HMRC’s strict criteria:
- the employee has to work later than usual, normally until 9.00pm;
- this happens irregularly;
- by the time the employee has finished, public transport is not available, or it would be unreasonable to expect them to use it;
- transport is by taxi, or other similar method; and
- it cannot exceed more than 60 journeys in a tax year.
If all of the above criteria are met, then the costs would be exempt from tax.
Where the exemption does not apply, HMRC has agreed that if the benefit has been provided as a result of Coronavirus restrictions, then it can be included on a PAYE settlement agreement (PSA). A PSA enables an employer to cover the tax and NIC due on certain types of benefits and expenses on behalf of employees.
Working from home allowance
Employers can contribute up to £6 per week, tax free, towards the additional household expenses incurred by employees working from home. Receipts/records are not required for this sum.
Laptops, mobile phones and broadband
- Laptops: if mainly used for business purposes, this is a non-taxable benefit.
- Mobile phones: the provision of one mobile phone and sim card (with no restriction on private use) is a tax-free benefit. The contract must be in the name of the company. If you reimburse the costs of your employee’s phone this will incur a benefit in kind charge, unless it is for the cost of business calls only.
- Broadband: if a broadband connection is needed to work from home, and one is not already available, then this can be provided, and is not taxable. However, if your employee already has broadband, then no additional expense can be claimed without incurring tax consequences.
Office equipment
Where an employee needs furniture or equipment (e.g. desk, chairs etc.) to work from home, if you agree to reimburse the costs of this equipment then this would not be a taxable benefit providing there is no significant private use.
Provision of living accommodation
If your employee is unable to return home due to coronavirus and you agree to reimburse the cost of their overnight accommodation, this is a taxable benefit. As with travel expenses, where this is arising as a result of the coronavirus, it can be reported through a PSA and the tax settled on behalf of the employee.
The usual exemptions regarding accommodation still apply:
- Employees provided with accommodation when working at a temporary workplace.
- If it is necessary for the proper performance of employee’s duties.
- If it is customary for employers to provide accommodation for the employee.
- If there is a special threat to the employee’s security.
Company cars
If your employee has a company car that was not used during the pandemic, they may feel that they should not incur the benefit in kind charges. HMRC has confirmed that company cars will still be treated as being available for private use even when the employee has been:
- instructed not to use the car;
- asked to take and keep photographic evidence of the mileage; and
- unable to physically return the vehicle/unable to be collected from the employee.
Where restrictions on movement applied which prevented the car from being returned or collected, HMRC has said that they will accept that a company car is unavailable in the following circumstances:
- on termination of the employment contract - from the date all keys to the vehicle are returned to the employer; or
- where contract has not been terminated - 30 days after the date that all car keys were returned to the employer.
Employer provided loans
Employers may have advanced salary or provided a loan as a result of hardship during the pandemic. Where the loan does not exceed £10,000, the provision of that loan is not taxable.
Personal protective equipment (PPE)
Where employees are working in circumstances where the risk of transmission is very high and your risk assessment shows that PPE is required, then this must be provided free of charge and is not a taxable benefit.
Eye tests and glasses
Use of computers has increased during lockdown. Your employees may therefore benefit from an eye test, which is an exempt benefit if they are for employees who use a computer monitor or other screen in their work.
The provision of glasses/contact lenses, or a contribution towards them, are also exempt if they are required for monitor or screen work.
Flu vaccines
Seasonal flu vaccines should be treated as a trivial benefit, and is therefore not subject to income tax or NIC. This treatment does not apply to other medical treatment or immunisations.
Periodic medical checks/screening
One health check per year can be provided to employees as an exempt benefit.
Medical treatment to assist an employee’s return to work
Where an employee has been absent from work because of injury or ill health for at least 28 consecutive days, or has been assessed as unfit for work for the same period, employers can pay up to £500 for medical costs to aid an employee’s return to work.
Please note that ordinarily, payment of medical treatment, or health insurance is a taxable benefit in kind.
Coronavirus tests
Coronavirus tests provided by the Government as part of the national testing scheme, are not treated as a benefit in kind.
If you are providing antigen tests, outside of the Government’s national testing scheme, then no income tax or class 1A national insurance contributions are due.
Virtual events and annual party exemption
HMRC has updated its guidance to include virtual events within the annual party exemption. For this exemption to apply, the following conditions must be satisfied:
- It must be an annual event
- The cost must not exceed £150 (including VAT) per head, per annum.
- It must be open to all staff
If you have any queries as to the tax treatments of benefits, please do get in touch with Katie Williams on 01242 237661 or katie.williams@hazlewoods.co.uk