Time limit for ‘making good’ on benefits-in-kind

07 December 2016

Draft legislation has been published to ensure an employee who wants to ‘make good’ on a non-payrolled benefit in kind will have to make the payment to their employer by 6 July following the end of the tax year.

Geographical extent – The changes extend to all four nations of the UK. The draft legislation details the legislative amendments required for both Great Britain and Northern Ireland.

‘Making good’ is where the employee makes a payment in return for the benefit-in-kind they receive. The making good payment has the effect of reducing the taxable value of the benefit-in-kind, often to zero. This reduces the amount of the employee’s taxable earnings. The employee might make good if the employer requires the employee to make a contribution towards the provision of the benefit-in-kind; or if the employer or employee wants to reduce the tax due on the benefit-in-kind.

At present, there is a range of dates for making good on benefits-in-kind and, for some benefits-in-kind, there is no date in legislation. Employers have said that the current dates cause difficulties for employers and have requested clarity.

The clause sets a date of 6 July after the end of the tax year for making good on benefits-in-kind which are not accounted for in real time through Pay As You Earn (‘payrolled’). The taxable value, and the value on which Class 1A National Insurance contributions are payable, will be reduced only if the benefit-in-kind is made good by that date.

The clauses introduce amendments to legislation on specific benefits-in-kind and also to the provision on calculating the cash equivalent of benefits treated as earnings.

The change will affect making good on a tax liability arising in the tax year 2017-18 and subsequent years.

Draft legislation has been published in provision 3 on page 1 of the draft provisions for Finance Bill 2017. Further details can be found in the tax information and impact note (TIIN).


Comments are welcomed by 1 February 2016 and should be sent by email to employmentincome.policy@hmrc.gsi.gov.uk or by post to the Employment Income Policy team, Personal Tax: Customer, Product and Process, HM Revenue and Customs, Room 1E/08, 100 Parliament Street, London SW1A 2BQ.