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That's Ideal Simplifies: Expenses and Benefits For Employees

Breaking it down...

It can get confusing to know how to handle expenses and benefits for employees, especially at the moment whilst a lot of us are working at home. We've tried to compile some useful information to help you along the way. 

We recommend you also check the HMRC Tax Guide: 480 for more detailed advice and to check that the information provided in our advice blog is still correct and has not changed. 

P11D Form

If you provide your employees with mobile phones, or you pay your directors home phone and internet bills, you may need to report to HMRC and consider whether tax and national insurance contributions are due. 

If you have to report something to HMRC, you will need to fill in a P11D form. There are different sections to fill in depending on what you are reporting, we have listed in each circumstance which section you will need to refer to. 

Below we've listed various scenarios to help you figure out if you need to report to HMRC and to find the starting points if you do. 

Mobile Phones

Contract is between employer and supplier of the phone:

You, as the employer, do not need to report to HMRC, as long as both requirements are met:

  • You provide your employee with the use of only one mobile phone or SIM card
  • AND the phone contract between you and the Supplier

Contract between employee and supplier but employer pays provider direct:

  • Report cost on the P11D form, in section 'B'
  • OR if registered to payroll the benefit, you'll pay PAYE tax through payroll and Class 1 National Insurance through payroll

Contract between employee and supplier but employer reimburses employee:

  • Deduct PAYE tax through payroll
  • Deduct and pay Class 1 National Insurance through payroll.
  • No additional reporting requirements

Any business call charges over the monthly tariff must go in Section N of the P11D form. Or, if the reimbursement is going through payroll, then PAYE tax is deducted and no payment of National Insurance is required.  

Home

  • Nothing to report or pay if employer pays for home phone charges for business calls only.

The employer arranges and pays for a home phone which is used by Employee for both private and business calls:

  • Report to section 'K' of P11D
  • OR if registered to payroll the benefit, you'll pay PAYE tax through payroll and Class 1A National Insurance through payroll

Contract between employee and supplier, employer pays direct:

  • Must report the cost to section 'N' on P11D
  • OR if registered to payroll the benefit, you'll pay PAYE tax through payroll and Class 1 National Insurance through payroll

Contract between employee and supplier, employer reimburses the employee:

  • Counts as earnings
  • Add the amount reimbursed to employees earnings
  • OR if registered to payroll the benefit, you'll pay PAYE tax through payroll and Class 1 National Insurance through payroll
  • Employee can claim tax relief for business calls

Internet

General rules:

No tax charge on the expense that an employer incurs in providing directors and employees with supplies and services that are provided:

  • Other than on employers premises (e.g. employees work at home or whilst travelling)
  • So that the employee can perform duties of employment
  • Private use not significant (check the Employment Income Manual 21613 for more information)

Employer pays supplier direct:

  • Report in section K of the P11D
  • OR if registered to payroll the benefit, you'll pay PAYE tax through payroll and Class 1 National Insurance through payroll

Homeworking

  • Must be arrangements between employer and employee
  • Employee must work at home regularly under arrangements
  • Doesn't apply to informal business

Employers don't need to register homeworking employees with HMRC.

What's Included?

  • Equipment, services, supplies (computers, internet, office furniture, pen + paper).
  • Additional household expenses (electricity, gas)

If an employer supplies all of the above to an employee for business purposes only, they do not need to report this to HMRC.

Business and Private Use:

  • Report in section 'K' of the P11D
  • OR if registered to payroll the benefit, you'll pay PAYE tax through payroll and Class 1A National Insurance through payroll

If additional household expenses are covered, you do not have to report if all of the following apply:

  • The employee needs to work from home 
    • Because equipment is not available in work place  -OR-
    • Because they live too far away
  • The amount you give them isn't more than additional household expenses or more than weekly limit.

Weekly limit (as of 6 April 2020) = £6 a week/£26 a month.

Covid-19 and Homeworking

Who is affected?

  • Those working from home due to Covid-19
  • Those whose workplace has closed
  • Those who have been advised to self-isolate

Who is not affected?

  • Furloughed workers eligible for the Coronavirus Job Retention Scheme

Broadband

  • If employee already pays for broadband - no additional expenses can be claimed
  • If broadband is needed to work from home and was not already available, then fee can be reimbursed by employer and is not taxable
    • Provided for business use and private use limited

Laptops, tables, computers and office supplies

  • Used for business purposes
  • Not significant private use

Reimbursing Expenses for Office Equipment

  • Need to buy office equipment to allow them to work at home
  • Reimburse cost - not taxable if no significant private use
  • If you don't reimburse cost, employee can claim tax relief on P87
  • Employee needs to keep record of purchase and claim exact amount