One of the benefits in kind that is often missed from the P11D form each year is where an employee or director receives a “cheap” or interest-free loan from the business. The benefit in kind in this circumstance is effectively the interest that would have been paid should interest have been charged at a commercial rate.

However, there are exemptions to this rule where either the total loan given to the employee/director does not exceed £5,000 at any point during the tax year, or where the loan is a qualifying loan (for example, where the director is using the loan to acquire a share in a partnership or trading business). These exemptions mean that no benefit in kind is chargeable.

There are several complications to these rules, so please contact janice@a4gsolutions.co.uk  before completing your P11D’s if you have any queries.

Any company owned or leased car which is provided to an employee and available for any private mileage must be declared as a benefit in kind on the employee’s P11D. The employee pays income tax and the employer pays Class 1a National Insurance on the value of the benefit.

The benefit value of a company car is based upon the CO2 emissions which equate to a specified percentage, which is then applied to the original list price (not original purchase price) of the vehicle. HMRC have gradually increased the percentages applicable thus increasing the costs of company cars for both employer and employee.

Due to the increasing costs, many employers either have or are looking to reduce the number of company cars provided, by either paying employees to use their own cars, or where directors/senior employees have company cars, by restructuring their businesses to a hybrid partnership structure (as partners do not receive benefits in kind).

If you are looking to reduce your costs with regards to vehicles provided to staff, please contact janice@a4gsolutions.co.uk.

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