Employees benefits (FAO PAYROLLPRO?)

Londina

A client wants to give the following benefits to his employees:

-1700£ travel allowance
-benefit accomodation (max £1000 per month) (phase out after 3 years)
-any expenses related to moving into the accomodation to be refunded

Can these benefits be included in their payslips and which one are tax exempt? Which ones can be put on P11D?

Where I could find a list of typical employees benefits included in their payslips and how the tax is calculated?

Many thanks

payrollpro

Londina,

I have a big problem with this simply because your queries are too big to deal with here and there is a principle involved. By their very nature benefits in kind are a completely separate part of the employment package and are often dealt with by someone other than payroll, usually because the skills needed are completely different.

For example, the travel allowance is not a good idea because as you describe it the employee will pay both income tax and NIC's on the payment made, through the payroll. At year end they can submit a claim directly to HMRC for a refund of income tax as long as they have the necessary evidence to prove the travel was actually undertaken. They will not get their NIC's back because once they are paid, you've lost them till you reach state pension age.

Other problems are: in order to claim the tax refund the employee holds the records of spending so your client cannot have the VAT back. Secondly the client is paying ER's NIC on the allowance, so can't get that back either. One advantage is that if your client's employee has a personal pension, they might be able to convince the provider to obtain a higher amount of tax relief, though this might be clawed back if HMRC insist on s self assessment return.

At the moment I don't want to go into the issue of the relocation as I tihnk that might be one to talk about in more detail.

The sort of benefits which come as standard and usually figure on payslips are holiday and sick pay, pension contributions, that sort of thing. Are you asking about typical salary sacrifice tax efficiency here, or am I missing something?

You can get me on the e-mail address I gave for the information I am trying to gather about agents and clients, or you can call me on 07903 834733

Ian

Londina

Many thanks Ian, I will try to get more information from what exactly the company wants to do before seeking further help.

I have never dealt with employees benefits and payroll, that's why my question is not straight forward, I can't even completely understand myself the situation yet.

I think the company is trying to give extra benefits to employee but without paying too much tax, otherwise maybe it's not worth it. Like you have pointed out, I think travel allowance should be out of the payslip and the employee should submit his expenses to be refunded seperately.

wildgoose1uk

If the travel expenses were to be actual expenses reimbursed and not the roundsum amounts proposed then there would be no paye/nic liability. It is doubtful if the accomodation benefit could be other than a bik unless HMRC could be convinced that it was necessary for the employee to live in the accomodation (merely living in the provided accomodation as it is too far to travel from home will not suffuce for this).

Some moving expenses may be allowable depending on the circumstances.

Have you looked on the CCH database?

payrollpro

Wild goose is right, but I didnt want to complicate things any more than they already were. The problem with actual reimbursement is that the employer has the responsibility to maintain all the records and make the checks prior to the returns and some employers don't want to do that. Paying a rounds sum costs more but there is no admin and its the employees job to keep all the records and make a claim.

I wanted to stay away from the accommodation because it may be a relocation, in which case it gets much more complicated, or it may satisfy the exemptions and there may be a claim against income for it and some travelling costs.

The CCH or other databases will help but I think Londina needs to get many more facts and we need to be certain that her client is doing something specific which can be dealt with or merely doing the "scatter gun" thing and causing everyone a lot of trouble.

There is a way of augmenting the pay package using exempt benefits and salary sacrifice and it can pay dividends for both sides, but it's a specialised area and needs careful planning and creation to make sure it complies. I am aware that because of a relative hands off approach by HMRC many "cycle to work" salary sacrifice schemes have been implemented which will not satisfy their new heavy handed approach.

Londina: I think you need to get a lot more information and to consider how far to go based on your skills and knowledge.

Ian

Londina

Hi

I had a good look at the HMRC yesterday and I found some interesting info here : http://www.hmrc.gov.uk/paye/exb/index.htm

Basically the client wants to offer Relocation and Removal transfer costs and if it's up to £8,000:
* no reporting requirements
* no tax or NICs to pay

About travel http://www.hmrc.gov.uk/paye/exb/a-z/t/travel.htm

I can't really find a straight forward answer, as the client is offering a travel allowance and the link above talks mainly about travel expenses that the employee pays and get reimbursed.

Thanks again for your help, I'm going to ask further help to a consultant today.

wildgoose1uk

It is as payroll pro said above. The travel allowance will be classed a sa rounsum allowance and as such will be subject to tax and ni in the normal way. The ee would have to keep evidence of what was actually spent on travel and claim the tax back through his tax return. That is assuming that the travel expenses are incurred int he course of bsuiness and not travelling from home to work and back again.

payrollpro

Londina,

I think you are right, the cost to you of giving incorrect information and advice could be considerable so it's not worth doing it unless you have the time to do the research and analyse what you find.

Don't forget to log what you have learned up til now as CPD, it's all valuable.

The rules for relocation are complex, first of all the current residence must be further than a reasonable commuting distance and the proposed new residence must be within a much more reasonable distance. The employee does not have to dispose of the old residence, merely change their principle private one. (There are potential capital gains tax issues in this but it's not your place to advise on that either)

The employee must make the move in a certain time and there are strict criteria determining what is and what isn't qualifying expenditure for the purposes of the exemption. Travelling expenses, including the family visiting the proposed new residence and area are allowed, surprisingly as are many other items, but not fixed allowances.

Any specifics you need, please call me.

Ian