Taxable benefits and facilities (480: Chapter 4)
Find out about the benefits and facilities where special taxing rules apply.
Overview
4.1
Section 201(1), Section 114(1), Section 174(1)
All benefits provided count as employment income of the employee for whom (or for whose family or household) they’re provided.
Particular benefits to which special taxing rules apply
4.2
Sections 192, 211 and 223, Sections 114, 149, 174, Section 554A
Certain benefits such as cars and vans available for private use, loans, certain arrangements in connection with share incentive schemes, scholarships and tax not deducted from employment income paid to directors are, however, taxed in accordance with special rules.
There are also special rules for certain arrangements for providing employment income through third parties. See chapter 1 paragraphs 1.16 to 1.23.
Types of taxable benefits
4.3
Benefits and facilities include:
Section 201(2), Sections 97, 201(2) and 315, Section 205
- the provision of living or other accommodation, including light, heat, rates and domestic or other services (see chapter 21)
- the use of any asset given by the employer or another person acting on the employer’s behalf, for example, the use of a motorcycle, an aircraft or yacht, or of furniture or a TV set – the way in which the benefit from the use of such an asset is valued is described in chapter 6, paragraph 6.7 except for cars which are considered in chapters 11 to 13, vans which are considered in chapter 14 and mobile phones which are considered in chapter 22
- the provision of fuel for private motoring in a provided car (see chapter 13)
Section 149
- gifts of assets to the employee, or the sale to the employee of assets at less than their market value (this applies not only to assets such as a car or a house, but also to goods such as clothes, TV sets, wines or groceries)
Section 62 and 90, Sections 206(2) and (3)
- any non-exempt expenses or liabilities incurred by the employee and paid direct by the employer, for example, hotel or restaurant bills, whether paid direct or through a credit card company
Section 62 and 90
- Income Tax not deducted from employment income paid to a director, but paid to HMRC by the employer and not reimbursed by the director (see chapter 19)
Section 223
- scholarships awarded to students by reason of their parents’ employment (see chapter 18)
Section 211
- any other benefits or facilities of any kind, for example:
Section 201(2)
- hotel accommodation and restaurant facilities arranged by the employer, holidays, childcare (but see chapter 5 and Appendix 11 for exemption of some forms of childcare)
- shooting, fishing and other sporting facilities (but see chapter 5 for exemption of some sporting facilities)
- work carried out at the employee’s residence
You can find more information on expenses and benefits and their tax treatment in the Business Tax PAYE guidance.
PAYE Settlement Agreement (PSA)
4.4
A PSA is a flexible scheme an employer can use to settle any PAYE tax and National Insurance contributions due to HMRC on 3 types of expense and benefit:
- minor items
- irregular items
- items it’s impractical to operate PAYE on or to value for P11D purposes
Under such a scheme an employer would settle the tax and National Insurance contributions due on the items covered by a PSA with a single payment that includes both:
- the tax due on the expenses and benefits covered by the PSA – this tax would normally be payable by an employee (usually through their tax code), and that the tax the employer pays must be ‘grossed up’ taking account of the tax rates payable by the employees covered by the PSA
- Class 1B National Insurance contributions, calculated not just on the value of the items covered by the PSA but also on the tax paid under the PSA
- a PSA can apply for all employees including those employees who are based overseas or who are not domiciled in the UK, provided the expenses or benefits concerned are chargeable in the UK as PAYE income
For more information, see the PAYE Settlement Agreements guidance.
Extension of Class 1A National Insurance contributions
4.5
Employers need to pay Class 1A National Insurance contributions on most benefits. See the P11D Guide and CWG5 for more information.