Advo Payroll Advisor, Hayley Hardy, takes a closer look at the management and reporting of expenses and benefits.

Expense and Benefits in the context of HMRC refers to non-cash perks or payments that employees (or company directors) receive from their employer in addition to salary or wages.

What counts as expenses and benefits:

• Company cars
• Health insurance
• Travel and entertainment expenses
• Childcare

Employers must report and, where necessary pay tax and National Insurance on benefits. Employers can register to report expenses and benefits through the payroll software and pay the tax on them throughout the year. This is called payrolling.

You do not need to report expenses and benefits for each employee at the end of the tax year if all their expenses and benefits are payrolled.

At the end of the tax year, you must still report the Class 1A National Insurance you owe by submitting an online form called a P11D(b).

If you do not pay expenses and benefits through payroll, you must complete a P11D for each employee or director and submit to HMRC. The deadline after the end of the tax year to submit a P11D is 6 July.

Tax on trivial benefits

Trivial benefits are best described as small ‘token gifts’ for employees. You do not have to report certain employee expenses or benefits to HMRC if they meet the below criteria:

• It costs you £50 or less to provide
• It isn’t cash or a cash voucher
• It isn’t a reward for work or performance
• It isn’t in the terms of contract

To better understand what trivial benefits are, it can be helpful to think of them as perks at work, or in other words, things you do not expect.

While there is no annual limit on the number of trivial benefits for employees, provided each benefit is £50 or less and meets the rules. However, you cannot receive trivial benefits worth more than £300 in a tax year if you’re the director of a ‘close’ company.

You must pay tax on any benefits that does not meet this criteria.

Expenses and benefits: social functions and parties

As the year draws to an end, employer’s providing social functions and parties for their employees, may have certain National Insurance and reporting obligations.

You might not have to report anything to HM Revenue and Customs (HMRC) or pay tax and National Insurance. To be exempt, the party or similar social function must:

• be open to all your employees
• be annual, such as a Christmas party or summer barbecue
• cost £150 or less per person

This also applies to online or virtual parties.

If any of the events cost less than £150 per head, you may be able to count these costs as exempt. But you cannot do this if you’ve already used up the £150 exemption on another event.

You’ll have to report and pay on the full costs of any additional events that go over this limit, even if they cost less than £150 per head on their own.

Need to know how this effects your organisation?  Just reach out to your Advo Account Manager.