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A: Healthcare cover provided by an employer is a taxable benefit reportable in the P11D return for each year it is provided. The employer also pays class 1A National Insurance contributions (NICs) on this benefit. When completing the P11D, it is advised that the whole cost of cover is reported; however, the taxable and class 1A NICs liability value can be reduced by any payments the employee makes towards the costs of provision of the benefit, if the contributions have been made after tax and NICs. In the case in question, the employee’s contribution relating to additional policy holders have been made via a net pay deduction, so the taxable benefit can be reduced by this value. Q: From April 2020 we have opted to payroll our BiKs which include benefits that attract class 1A NICs. With the new indicator for class 1A NICs on termination payments being introduced in the latest software update, enabling us to process the class 1A NICs via real time information (RTI), can we also report the class 1A NICs on other BiKs using this function? A: The ability to report and pay class 1A NICs on termination payments via RTI is not extended to class 1A NICs due on benefits. Class 1A NICs on benefits are different to those due on termination payments and will still require you as an employer to complete a P11D(b) return. This must be completed and paid to HMRC by 19 July following the tax year to which it relates, even if you have processed your benefits via payrolling. Q: We are looking at introducing a tech scheme via a salary sacrifice benefit for our employees. We are aware that this must be reported in a P11D, but what must we report for each employee? A: You will need to report the amount of cash forgone by the employee to be provided with this benefit. As the employee is giving up an amount of cash to be in receipt of a non-cash benefit, optional remuneration arrangement rules would apply. As the equipment is being provided via a salary sacrifice scheme, I would also advise that at the end of the scheme the employee will not own the equipment to which the salary sacrifice arrangement applied. This is because
the employee has not purchased the equipment – you as an employer have provided the employee with use of the equipment in exchange for them giving up a sum of their salary. At the end of the scheme, the employee can purchase the equipment from you at a second-hand cost. Any salary forgone cannot reduce the purchase amount; however, payments that have been ‘made good’ can. ‘Made good’ payments relate to deductions from the employee’s net pay that have already been adjusted by tax and NICs. If the employee does not wish to have a deduction for the second-hand cost, but the employer is willing to give the equipment to the employee, the employer must report the second-hand value of the equipment in a P11D under a transfer of asset. This value can be reduced by any ‘made good’ deductions or payment the employee makes. Q: We now process all BiKs via payrolling. A new employee started with us in February 2020 and has use of a company car but unfortunately this information wasn’t passed onto us in payroll until April. The BiK for the care should have been payrolled for the time the car was available in the last tax year. How do we correct this? A: As you have registered to payroll your benefits, you are able to carry over any un-payrolled amounts into the next tax year. If you have already made your final full payment submission for the tax year, then you can carry forward the amount by adding it to the employee’s first wage payment in the new tax year. Although you can carry the cost into the new tax year for the employee, you are unable to do the same for any employer’s class 1A NICs that may be due. You will still need to include the amounts in your P11D(b) return for the tax year to which it relates. n Correction The answer to the second question of the Advisory page in the April 2020 issue (page 8) advised to "use the pre- salary sacrifice pay". This should have said "use the post-salary sacrifice". Thank you to all those who drew this to our attention.
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| Professional in Payroll, Pensions and Reward |
Issue 60 | May 2020
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