BiKs with Cash Allowances, Flexible Benefit Packages and Salary Sacrifice
20 June 2018
Do you offer your employees cash allowances, flexible benefit packages with a cash option or salary sacrifice in return for a Benefit in Kind (BiK)?
HMRC included a reminder in their latest Employer Bulletin that the new rules for these types of BiKs changed on 6 April 2017. Arrangements entered into on or before 5 April 2017 kept their previous tax treatment until the earlier of a renewal or variation of the arrangement.
All pre-6 April 2017 BiKs moved into the new rules on 6 April 2018.
However, pre-6 April 2017 cars and accommodation move into the new rules on the earlier of renewal or variation or April 2021. Pre-6 April 2017 school fees have special rules, but all move into the new rules from April 2021.
P11Ds for 2017-18
You may have an employee who is in the traditional rules and then moves into the new rules mid-year. If so, then you can report it either as two separate BiKs or a combined figure.
P11Ds and cars
When completing the P11Ds you need to correctly complete all of the fields for cars. If you don’t do this:
you will pay the wrong amount of National Insurance Contributions,
your employees will pay the wrong tax, and
you will need to send HMRC an amended P11D in each case.
Common mistakes include putting in the wrong CO2 emissions, not including accessories and incorrectly recording capital contributions and private use payments. A capital contribution is a one-off payment towards buying the car, and private use payments are monthly or yearly payments for the use of the car. Both must be made out of net pay.
The Policy team would be very interested to hear member thoughts and experiences on issues with tax codes over the last 18 months or so. It would also be useful to know if you have had cases of double taxation either because of payrolling and P11D crossover, and/or dynamic coding. Please do send an email to policy using ‘tax code issues’ as the subject. Thank you.