As an employer, if you provide your employees with something other than pay it may count as an expense or benefit.
Expenses and benefits commonly include company cars, health insurance, travel and entertainment expenses and childcare. There are many other examples of benefits.
If this other compensation counts as expenses or benefits, as an employer you may have to report it to HMRC and pay tax and National Insurance contributions on it.
There are varying requirements for the reporting of benefits and these differ depending on the type of benefit provided. Generally on of the following requirements will apply:
• At the end of the tax year you report the item on the employee’s form P9D or P11D and – where a P11D is completed – pay Class 1A NICs on it
• You treat the expense or benefit as if it were normal earnings, adding its value to your employee’s other earnings when working out PAYE (Pay As You Earn) tax and Class 1 NICs using your usual payroll procedures
• You add the item’s value to your employee’s earnings for Class 1 NICs purposes only (not for PAYE tax) through your payroll. Then at the end of the tax year you report it on the employee’s form P9D or P11D
• You have no tax or NICs to pay, but at the end of the tax year you report the item on your employee’s form P9D or P11D
• You have no reporting requirements and no tax or NICs to pay
