TAX on benefits in kind

[FunkyGibbon]

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

[FunkyGibbon]

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]

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]

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.

[FunkyGibbon]

PBDirector said:

What a tool!

Quite!

[FunkyGibbon]

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]

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!!!

Thanks for that

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

I HOPE

Edited by FunkyGibbon on Wednesday 22 October 11:20

[FunkyGibbon]

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

[FunkyGibbon]

ReallyReallyGood said:

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

Phew - just checked that on HMRC website.

That is still a quite a penalty for just £280 of revenue. Then again that's what penalties are for I guess.

[FunkyGibbon]

Thanks for all your help guys!

[FunkyGibbon]

Just a thought - as well as any fines and penalties the employee would still be subject to paying back the tax of £280 per annum?

[FunkyGibbon]

Eric Mc said:

Is there any way you could explain the fact that he wasn't paying for his meals as being an essential part of his job?

He'd claim essential I'm sure. But I'd struggle to defend it, it is convenience and a status symbol.

To be fair he does work through his lunch (he eats at his desk), but then so do I and many other staff if not all.

Eric Mc said:

What is the nature of the business?

School

Eric Mc said:

What is the employee's role in the business?

the head

[FunkyGibbon]

Eric Mc said:

That was what I was trying to get at.

If the service provided to the staff member is NECESSARY for the performance of his duty, then there is no BIK.

He may have a case for being fed then without a BIK being imposed. I know it might sound a bit cheeky but it might, just, get you off the hook.

Not that I want to defend his position, but what is the test of NECESSARY?

The necessary bit for him is the flexibility of eating something when he can over a tight and variable window of opportunity. Which is probably the same for most people. So as I see it the necessary part is convenience rather than how it is paid for.

(I'm sure as st hoping he's not on PH!)

(And yes - oop North somewhere)

[FunkyGibbon]

Pit Pony said:

The lunch didn't come via the works canteen, where it could have been hidden in the "wastage" then. Invoices from a sandwich shop ? Surely this sort of thing goes un-receipted via petty cash ?

Invoices from our 3rd party caterer, and we don't permit un-receipted petty cash...

[FunkyGibbon]

Eric Mc said:

Who is making the fuss over this?

Our auditors and Responsible officer. There have been a number of expense irregularities in the education sector, so the National Audit office has instructed auditors (via a directive to the education funding agency and DfE) to test for these when carrying out the audits.

[FunkyGibbon]

Update - he has seen sense and the error of his ways and will pay for his own lunch, largely in part to the advice from you guys.



Many thanks

FG