The same rules now apply to tax expenses and benefits regardless of how much the employee earns and whether he or she is a director.
Same rules for all
The same rules now apply to tax expenses and benefits regardless of how much the employee earns and whether he or she is a director. The old £8,500 threshold was abolished from 6 April 2016. Since that date, employees who were previously P9D employees are taxed on any benefits in kind that they receive in the same way as for P11D employees. This means that benefits such as company cars and private medical insurance are now taxable if the employee earns less than £8,500.
No more P9Ds
As a result of the changes, 2015/16 is the last tax year for which P9Ds are required. From 2016/17, where an employee has received a taxable benefit in kind, you will need to use form P11D to tell HMRC about that benefit, unless you have opted to tax it through the payroll.
Payrolling for 2017/18
Although it is now too late now to start payrolling for 2016/17, looking ahead to next year, if you want to deal with some or all of the taxable benefits that you provide through the payroll instead of reporting them to HMRC on form P11D after the end of the tax year, you need to register to do so by 5 April 2017. Speak to your adviser about what benefits can be payrolled and whether payrolling is for you.
New exemption for deductible expenses
A new exemption replaced the dispensation regime from 6 April 2016. It is available for expenses which would be fully deductible if the employee met the expense from his or her own pocket. Items such as business travel qualify. The exemption, which applies to qualifying paid and reimbursed expenses, is given automatically. Unlike the old dispensations, you no longer need to apply.
The long-awaited exemption for trivial benefits came into effect from 6 April 2016. Broadly, a benefit is trivial if the cost of providing it is £50 or less. Benefits that count as ‘trivial’ can be ignored and do not need to be reported to HMRC. Items such as a bunch of flowers sent to an employee on her birthday or a bottle of wine given to employees at Christmas may pass the ‘trivial’ test. However, for directors and employees of close companies, the trivial benefits exemption is capped at £300 per individual per year.
Speak to your adviser to discuss how you can make best use of these new exemptions.