Tax Quicky

slackda

bit rusty on my personal Tax, but my understanding is that a taxable benefit is reduced if the employee pays towards said benefit.

Im this case the benefit is HSA, aorund £300 per Year, the employee is given flexi pay £250, which they can either take as just pay or offest against the cost of benefit...so i actually the staff never get a benefit as they have to foot the bil for the difference between the £300 and £250, i suppose they get the benefit of tax relief on £50.


As i remeber it these are all taxable items.

Gross Pay X
Flexi Pay X
Cost of "Benefit" (X)
Taxable Income X

Any Thoughts would be appreicated,

slackda

Sry to do a shamelss bump. but *Bump:D

KaySarah

I'm not sure what a shameless bump has to do with P11D BIK - but you're quite right ... Employees contribution towards the benefit reduces the value of the benefit.

slackda

*bump was to get it back to the top of the page

yeah thats my thought but the company in question are showing the full value of the benefit on the P11'd despite the employee paying for it...are cash health schemes different? i can't find anything on the topic on the maze that is HMRC

Monsoon

I don't know the answer 100% but my understanding is that the value of the BIK is reduced by any contributions the employee makes to their employer in respcet of them.

Jmann

slackda wrote: »

bit rusty on my personal Tax, but my understanding is that a taxable benefit is reduced if the employee pays towards said benefit.

Only if actually paid by the employee or deducted from the net pay. What happens if the employee take this "Flexi pay" as pay? Is it paid through payroll and paye & nic deducted?

I think the company is correct and full amount is taxable hence, subject to P11D.

John

slackda

Hi Jmann,

Spot on, if the employee takes the flexi pay then they pay Tax and NI on that.

I guess as the Cost of the benefit is being taken from the Gross pay, they are receiving a Tax Benefit, but surely the tax benefit is only the difference between the extra flexi pay and the amount being deducted from salary?

deanshepherd

I agree with John.

If I understand correctly, the employees are offered either a £250 bonus or a £300 benefit.

The £250 is taxed and NIC'd through payroll. The benefit is taxed and NIC'd via P11D.

Presumably those who choose the benefit are not also taxed on the £250 as you seem to infer.

Jmann

slackda wrote: »

Hi Jmann,

Spot on, if the employee takes the flexi pay then they pay Tax and NI on that.

I guess as the Cost of the benefit is being taken from the Gross pay, they are receiving a Tax Benefit, but surely the tax benefit is only the difference between the extra flexi pay and the amount being deducted from salary?

Well there is no tax benefit whether you take flexi pay as cash or off set against the benefits received. Here are two different situation.

Flexi pay as a cash salary = Taxed and Nic'd through normal payroll (paye). You pay benefit from your own pocket hence, £300 taxed & nic'd through payroll.

£300, Tax = 60, EE's NIC = £36


Total tax & ni = £96.00

Flexi pay offset against the benefit = £250 is taxed via p11d, no Ees' NIC as reported on P11D. The remainig £50 is paid / deducted from net pay so, it is taxed and nic'd via payroll.

£250, Tax = £50, EE's nic = 0
£50, tax = £10, EE's nic = 6

Total tax & ni £66.00

As you can see it just employee nic benefits!

slackda

deanshepherd wrote: »

I agree with John.

If I understand correctly, the employees are offered either a £250 bonus or a £300 benefit.

The £250 is taxed and NIC'd through payroll. The benefit is taxed and NIC'd via P11D.

Presumably those who choose the benefit are not also taxed on the £250 as you seem to infer.

nearly There Dean, not an either/or the empoyee gets £250 (over the year) and chooses wether to purchase a "benefit" with that money or just keep the cash.

deanshepherd

slackda wrote: »

..and chooses whether to purchase a "benefit" with that money or just keep the cash.

You say purchase a benefit "with that money". Is that really what you mean?

If that is the case then everyone will get taxed on the £250 as extra salary and some will then choose to buy a BIK valued at £300 for only £250. Except now they have already been taxed on the £250 so they are having to find extra cash out of net income. In reality this BIK is going to cost basic rate taxpayers £368 (£250 grossed up for tax and NI).

I can't believe this benefit would have been so poorly set up.

It must be an either/or scenario.

slackda

Neary there dean but the benefit is paid from gross. salary

deanshepherd

Ok, so it is either/or then.