TAX on benefits in kind

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FunkyGibbon

Original Poster:

3,781 posts

263 months

Tuesday 21st October 2014
quotequote all
Hi All

For the purpose of this Q if you assume I know nothing about tax and HMRC etc. - you'd be spot on!

We have a scenario where a member of staff claims a free lunch at work - he is the only one.

We have been advised that we should be declaring this on P11D - which we haven't.

So, we are in trouble I guess, unless he pays back the cost of the lunches hence not receiving any benefit.

What level of TAX would he end up paying is the annual value of the benefit was circa £700 per annum?

What penalties would we face if a) we filed the P11D late (for the last 2 financial years) b) didn't file at all.

Thanks in advance

plasticpig

12,932 posts

224 months

Tuesday 21st October 2014
quotequote all
£100 per month penalty for late submission.

Eric Mc

121,775 posts

264 months

Tuesday 21st October 2014
quotequote all
How many years was this going on?

In other words, how many P11Ds was this omitted from or how many P11Ds were not submitted?

HMRC has the power to fine the employer for each incorrect or omitted P11D. The maximum fine can be £3,000 for each incorrect/omitted P11D.

As far as the employee is concerned they will be liable to tax at their top rate - whatever this is.

MrPicky

1,233 posts

266 months

Tuesday 21st October 2014
quotequote all
It used to be possible to supply a level of Luncheon Vouchers without levying tax on them, the employee could pay for the lunch with these vouchers.

Does the scheme still exist?

Has it been replaced by something else specific to lunches, there are still a few subsidised canteens around, how do these not attract tax?

davek_964

8,796 posts

174 months

Tuesday 21st October 2014
quotequote all
MrPicky said:
It used to be possible to supply a level of Luncheon Vouchers without levying tax on them, the employee could pay for the lunch with these vouchers.

Does the scheme still exist?

Has it been replaced by something else specific to lunches, there are still a few subsidised canteens around, how do these not attract tax?
There is something like that still around. At my last job we got £2.70 voucher a day towards lunch at our site canteen, and it was non taxable and does not appear on P11D. I think the value matters but not sure what the details are.

plasticpig

12,932 posts

224 months

Tuesday 21st October 2014
quotequote all
MrPicky said:
It used to be possible to supply a level of Luncheon Vouchers without levying tax on them, the employee could pay for the lunch with these vouchers.

Does the scheme still exist?

Has it been replaced by something else specific to lunches, there are still a few subsidised canteens around, how do these not attract tax?
You have to supply that to all employees. From what the OP says that is not the case here.

Snollygoster

1,538 posts

138 months

Tuesday 21st October 2014
quotequote all
FunkyGibbon said:
Hi All

What level of TAX would he end up paying is the annual value of the benefit was circa £700 per annum?

What penalties would we face if a) we filed the P11D late (for the last 2 financial years) b) didn't file at all.
Not sure about the latter questions, but in regards to your first question, he would have to pay the £700 x by his tax rate.

So for 20%/40% £140p.a./£280.pa

Pit Pony

8,265 posts

120 months

Tuesday 21st October 2014
quotequote all
Can I ask why this person was the only one with a free lunch and how the HMRC came to know ?

FunkyGibbon

Original Poster:

3,781 posts

263 months

Wednesday 22nd October 2014
quotequote all
Eric Mc said:
How many years was this going on?

In other words, how many P11Ds was this omitted from or how many P11Ds were not submitted?

HMRC has the power to fine the employer for each incorrect or omitted P11D. The maximum fine can be £3,000 for each incorrect/omitted P11D.

As far as the employee is concerned they will be liable to tax at their top rate - whatever this is.
Thanks Eric. This has been going on since September 2012 to date. I want to work out the likely penalty vs him simply paying for his lunch, so I can persuade him the best course of action is to pay like the rest of us.

FG

FunkyGibbon

Original Poster:

3,781 posts

263 months

Wednesday 22nd October 2014
quotequote all
Pit Pony said:
Can I ask why this person was the only one with a free lunch and how the HMRC came to know ?
He's the big boss and demanded it. HMRC don't currently know, but our Auditors have spotted in whist testing some account transactions. They have raised it, so I now need to act.

FunkyGibbon

Original Poster:

3,781 posts

263 months

Wednesday 22nd October 2014
quotequote all
plasticpig said:
You have to supply that to all employees. From what the OP says that is not the case here.
That is correct - he's the only one.

PBDirector

1,049 posts

129 months

Wednesday 22nd October 2014
quotequote all
FunkyGibbon said:
He's the big boss and demanded it.
What a tool!

FunkyGibbon

Original Poster:

3,781 posts

263 months

Wednesday 22nd October 2014
quotequote all
PBDirector said:
What a tool!
Quite!

Eric Mc

121,775 posts

264 months

Wednesday 22nd October 2014
quotequote all
FunkyGibbon said:
Thanks Eric. This has been going on since September 2012 to date. I want to work out the likely penalty vs him simply paying for his lunch, so I can persuade him the best course of action is to pay like the rest of us.

FG
So the tax years affected are 2012/13, 20213/14 and 2014/15.

Were P11Ds prepared and submitted for staff during the years 2012/13 and 2013/14?

Is the employee concerned a director or a higher paid employee (Higher Paid means having a Gross Salary rate of £8,500 per annum - yes, madness, I know)?

Were other benefits in kind or expense claims omitted from P11Ds?

PBDirector

1,049 posts

129 months

Wednesday 22nd October 2014
quotequote all
FunkyGibbon said:
Quite!
Are you certain that he's not thrown it in as a comparatively trivial distraction for the auditors?

TO HIDE THE REAL ICEBERG??????!!!!!

Happy Halloween!!!

biggrin

FunkyGibbon

Original Poster:

3,781 posts

263 months

Wednesday 22nd October 2014
quotequote all
Eric Mc said:
So the tax years affected are 2012/13, 20213/14 and 2014/15.
yes

Eric Mc said:
Were P11Ds prepared and submitted for staff during the years 2012/13 and 2013/14?
No - we have dispensation already agreed with HMRC

Eric Mc said:
Is the employee concerned a director or a higher paid employee (Higher Paid means having a Gross Salary rate of £8,500 per annum - yes, madness, I know)?
Yes, quite considerably more that 8.5K!

Eric Mc said:
Were other benefits in kind or expense claims omitted from P11Ds?
No - see above we have dispensations in place.

Edited to add: all expenses are processed via payroll and therefore PAYE.

Edited by FunkyGibbon on Wednesday 22 October 11:20

FunkyGibbon

Original Poster:

3,781 posts

263 months

Wednesday 22nd October 2014
quotequote all
PBDirector said:
Are you certain that he's not thrown it in as a comparatively trivial distraction for the auditors?

TO HIDE THE REAL ICEBERG??????!!!!!

Happy Halloween!!!

biggrin
Thanks for that biggrin

To be honest, don't think he has the nouse.

I HOPE

Edited by FunkyGibbon on Wednesday 22 October 11:20

Eric Mc

121,775 posts

264 months

Wednesday 22nd October 2014
quotequote all
Here are the standard penalties for non-submission or late P11Ds -

Penalties

Non-submission or overdue:

Form P11D(b): £100 per every 50 employees (or part of 50) per month or part month.


Incorrect P11D and P11D(b)returns:

A penalty is based on a % of potential revenue lost according to taxpayer behaviour and degree of culpability or guilt:

100% (deliberate and concealed action)
70% (deliberate but not concealed action)
30% (careless action)
0% (genuine mistake, after taking reasonable care)


Late payment of Class 1A NIC

Non-payment Class 1A NIC: statutory interest charged immediately from 19 July (22nd if paid electronically)

FunkyGibbon

Original Poster:

3,781 posts

263 months

Wednesday 22nd October 2014
quotequote all
Is the £100 per 50 employees (or part of) per month - the number of employees who should have submitted P11D - or the number of employees in total?

So, if latter, £100 * 250 staff per month is one hell of a bill - £300K a year. Not much better if a £100 * 50 per month - £60K.


All this for £700 a year, that would raise £280 of tax revenue?

<bricking it>
Please tell me I've calculated this wrong.
</bricking it>

I guess the reduction in penalty is mute as the P11Ds weren't errant, they were not submitted. That said, as we only found out about this isssue 3 days ago, would we class as careless action, or genuine mistake?


Edited by FunkyGibbon on Wednesday 22 October 11:46

ReallyReallyGood

1,620 posts

129 months

Wednesday 22nd October 2014
quotequote all
FunkyGibbon said:
Is the £100 per 50 employees (or part of) per month - the number of employees who should have submitted P11D - or the number of employees in total?

So, if latter, £100 * 250 staff per month is one hell of a bill - £300K a year. Not much better if a £100 * 50 per month - £60K.


All this for £700 a year, that would raise £280 of tac revenue?

<bricking it>
Please tell me I've calculated this wrong.
</bricking it>

I guess the reduction in penalty is mute as the P11Ds weren't errant, they were not submitted. That said, as we only found out about this isssue 3 days ago, would we class as careless action, or genuine mistake?
If it's all employees, £100 per every 50 employess, so if you have 250 staff that's 250/50 = 5 x £100 / month = £6k/yr
If it's just this one guy, £100/month = £1200/yr