POLICY HUB
payroll for class 1 National Insurance contributions (NICs). There are two options to report the tax, and the process will depend on whether you’re registered to payroll benefits or not. If you are registered, you would add the value to the employee’s taxable pay. If you’re not registered to payroll benefits, you would report the value on the P11D. Please see here for further information: https:// ow.ly/4oXg50PtWbJ. If you wish to cover the cost of the tax and NICs on the employee’s behalf, you would process the grossed up total value through the payroll. Reimbursement for eye tests and glasses Q: If an employee has a display screen equipment (DSE) eye test and / or glasses, and pays for the treatment but is then reimbursed by the company, how is this treated? A: An employer cannot reimburse the cost of the eye tests or glasses / contact lenses, as this would lead to a pecuniary liability. Section 320A of ITEPA 2003 specifically states, “No liability to income tax arises in respect of the provision for an employee of – (a) an eye and eyesight test, or (b) special corrective appliances that an eye and eyesight test shows are necessary, if conditions A and B are met. Condition A is that the provision of the test and appliances is required by regulations made under the Health and Safety at Work Act 1974. Condition B is that the tests and appliances mentioned in condition A are made available to those employees of the employer in question for whom they are required to be provided under the regulations.” An employer can arrange the provision of an eyesight test and cover the cost of glasses / contact lenses without a benefit in kind (BIK) arising, providing the employee is required to use a visual display unit (VDU) as part of the normal duties of their employment. If an employer were to pay for glasses for general use (including use of a VDU), which don’t require a special prescription, the cost must be split to demonstrate the cost of the use of a VDU against the cost for general use to avoid a BIK. So, it’s advisable to keep itemised receipts for both an eye test and a prescription, should HMRC conduct a review. If an eye test identifies a need for both
general and VDU use, and the employer settles the entire bill, a pecuniary liability will arise on the amount which excludes the VDU prescription. This is because an employer can only cover the cost of the VDU element of the eye test and prescription. Anything more will incur a pecuniary liability. Relevant information can be accessed in the following locations: Section 320A ITEPA (2003): https://ow.ly/ WiNE50PtZfB EIM 21765: https://ow.ly/I1OL50PtZsZ National Insurance Manual (NIM) 02145: https://ow.ly/Wbgk50Pu2mb EIM00580: https://ow.ly/CI2e50PtZPl.
If employers help employees with the cost of childcare when attending work- related evening events, what are the associated tax implications?
Tax implications of reimbursing employees for childcare costs Q: Can we offer our employees financial support if they need to pay for carers / babysitters when they’re invited / expected to attend a work event in the evening? Could you advise how we would treat this? Are you aware of any significant tax implications if we offered this option to our employees? This would be a separate arrangement to our childcare voucher scheme. A : If the employees pay for their own childminding arrangements and the company reimbursed the costs of this, a pecuniary liability will arise and tax and class 1 NICs would become due via the payroll. If you wish to cover the cost of the tax and NICs on the employee’s behalf, you would process the grossed up total value through the payroll. Tax-free childcare provision has been scaled back in recent years, as the government introduced free childcare. Unless you have an employer-provided nursery, then the costs incurred will be liable to tax and class 1 NICs. Please see here for further information: https://ow.ly/ tHGz50Pu5t8. n
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| Professional in Payroll, Pensions and Reward |
Issue 93 | September 2023
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