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guide
Contents:
What is a benefit?
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Statutory exemptions
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Dispensations
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What is a benefit?
When you receive anything from your company which benefits you
Perks which are not essential to your business are taxed in order to prevent
you from disguising your payment through benefits. Its a good idea to
likely to be classed as a benefit in kind. You may be liable to pay Income Tax
If you are the director of your company then you are automatically liable
Your benefits are recorded at the end of the tax year via a P11D form, which
to pay tax regardless of your income. However, if you employ others in your
you can learn more about here. Some benefits are tax free and therefore do
limited company, it will only become necessary to account for their perks if
can sometimes be difficult if it has a dual purpose and you use it for both
business and personal use. HMRC will not usually permit tax free benefits
that have a dual purpose, unless the personal use is a consequence of the
necessary business use, and providing the personal use is insignificant.
This guide will go over which benefit types fall into which category.
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You can find your vehicles liability by cross referencing the two on HMRCs
table. There is also an additional charge if the company pays private fuel
director) for the purpose of work and is also available for private use, then a
Benefit in Kind tax is applied and subsequently needs to be reported on your
The only exception is if there is a company pool car, but it must be:
P11D.
Kept locked at the work premises that are separate to your home
As an incentive for companies to be more environmentally friendly, tax relief is
Company van
the market price the day before it was registered, plus any additional
a depot overnight and fetch it before work every morning. This means that
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Any vehicle weighing in excess of 3,500kg will incur no taxable benefit, as will
Home as an office
lot of suspicion by HMRC, and should consequently only be claimed for if its
If you owe your company in excess of 5,000 (interest free) at any given time,
adding together the total miles traveled in the course of your business, that
the loan is classed as a benefit in kind and you will need to personally submit
it on your P11D. Your Company will not be charged PAYE, but you will be
required to pay class 1A National Insurance tax at 13.8% on the value of the
benefit.
Only payments specifically for carrying passengers count. Visit our rates
page for the current figures.
If you are paying under the HMRC official rate, or no interest, you must
declare it on your annual Self Assessment, as you may be taxed on the
subsequent interest.
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Via Ed Ivanushkin
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Statutory exemptions
When considering whether to pay for a benefit through your limited company
In order to qualify for a benefit in kind, the contract must be in the companys
you may want to weigh up the tax implications. Sometimes paying through
name and the phone must be designed or adapted for the primary use of
Fortunately, there are a number of tax free benefits which are available to
If the contract falls under a personal contract you will only be able to
your limited company that you may wish to take advantage of.
account for the business calls as an expense but will not be able to claim for
the personal use. Legally, the main purpose of the device has to be verbal
Company mobile
director) with one mobile phone free of tax and National Insurance, to use
digital assistants as computers. However, under the new 2006 Finance Act,
for private and business use without having to record it on your P11D. This will
as long as the primary use is for telephone calls, all extraneous services the
cover the full bill, including line rental, the cost of any calls made and any
data allowance.
So for instance, laptops, tablets and satnavs do not qualify as mobiles even
if they have the capability to make calls, because their primary use is not
intended for making and receiving calls. BlackBerrys and smartphones do
qualify as mobiles.
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If you use a hands free set you may require a different sim card - this is
By the time you or the employee stops work, either public transport has
You may be able to supply each employee with up to 243 per month, tax
free, childcare support, providing the employee meets certain conditions.
You may invite a partner but you must not exceed expenditure of 150 (inc.
VAT) per head. You and your partner count as one head.
There are two ways in which you can allocate payment: either by direct
agreement with a childcare provider, or through a voucher scheme. If you
If you choose you can split the cost between multiple events of a similar
decide to go through a direct channel, you will need a letter between you
nature, providing you do not exceed the annual sum of 150 (inc. VAT) per
employee.
A child is eligible up until their 15th birthday (16th if disabled). In order to
Health checks
qualify for childcare you must meet these conditions. Your employee, or you,
must:
Any employee of your limited company is entitled to one tax free health
check in any given year. The health check is a physical examination to
Your limited company can provide a late night taxi ride from work to home,
Trivial benefit
run a childcare business and are looking after other children also
On the day of the journey, you were required to work later than usual and
gift or a standard bottle of wine would pass as trivial and would subsequently
not be taxed.
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Theres not much ground for debate over what defines trivial. Its not a matter
of personal opinion, its what HMRC consider trivial, which in reality is very little.
Work-related training expenses
Any training conducted with the intention of improving the ability of an
employee (or yourself) to do a current or future job at the company is
completely tax free.
Training encompasses a broad range of activities - from enhancing your
leadership & social development skills for work, to practical and theoretical
skills that you are reasonably likely to implement in your work.
The tax exemption extends to necessary travel and childcare cover during
the training, and any costs incurred for any examinations or learning aids.
Training, or training-related travel and subsistence, which provides
entertainment, recreation, reward or an inducement, remains taxable.
However, when the entertainment is available as a subsequent addition
to the training and is not too extravagant - for example, a swimming pool
available at the accommodation provided for the training - then the
entertainment is tax free.
Supplies and services provided by your business
Supplies such as equipment, stationery and consumables provided to you to
perform your duties are allowable for occasional private use, providing that
its not significant, and that the primary focus remains business related.
Vehicles, boats or aircrafts, if you have one, do not apply.
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Via Didriks
Dispensations
What is a dispensation?
Whats covered?
You can apply to HMRC for a dispensation to cover expenses or benefits for
benefits. You can apply for a dispensation through HMRC. If the application
is successful, you:
The main expenses routinely covered by a dispensation are:
Will no longer have to report on the benefit or expense in question at the
Telephones
Business entertainment expenses
regularly (usually at intervals of five years or less) to make sure that the
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Requirements
You can apply for a dispensation at any time. Generally, they will take effect
from the date on which HMRC issues them. However, HMRC may agree your
dispensation can take effect from the beginning of the tax year in which
place to make sure that the claims arent excessive or for any disallowed
you applied for it if you were paying those expenses and making the benefit
claiming.
You should use the A to Z guide to check which expenses can be included
If you cant get an independent person to this - for example, if you are a
sole employee of your company - then you will only be able to obtain a
cant save your progress once youve started and return to it at a later time.
dispensation if you:
Ensure all expenses claims are supported by receipts for the expenditure
If your circumstances change with regards to any any claimed items you
must advise HMRC as soon as possible. If you fail to do so, HMRC may revoke
a dispensation - your receipts may be sufficient for this purpose, but if not
the dispensation and collect the tax you would have had to pay.
How to apply
You can apply using this online form. You will need to provide details about
The Crunch blog has a whole section dedicated to giving you the
best advice on how to run your small business. Click here to discover.
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This document contains guidance only and is not a substitute for tailored advice from a Crunch
accountant. Contact your Crunch Account Manager for advice pertaining to your specific
business and situation. All content is copyright E-Crunch Ltd 2015.
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