Changes made to alignment dates for making good on benefits in kind

Draft guidance has been released by the government for changes to the tax treatment of benefits in kind where an employee 'makes good' the benefits in kind from 2017 to 2018 tax year

In August 2016, the government proposed limiting the range of benefits-in-kind that attract income tax and National Insurance Contributions (NICs) advantages when provided as part of salary sacrifice arrangements.

It also proposed aligning the dates by which an employee has to make a payment to their employer in return for benefits-in-kind they receive, in order to ‘make good’.

Making good has the effect of reducing the taxable value of the benefit, often to zero and reduces the amount of tax and Class 1A NICS payable on the benefit.

Benefits-in-kind include things such as mobile phones and workplace parking. Several health-related benefits-in-kind such as cycle to work were not included in the original proposals as the government wishes to encourage their use.

The guidance only applies to making good benefits which are not payrolled through PAYE under voluntary payrolling arrangements and applies for 2017 to 2018 onwards.

From the 2017 to 2018 tax year, the latest date for making good for all non-payrolled benefits other than beneficial loans is 6 July following the end of the tax year in which the benefit is provided if the amount made good is to be taken into account for tax and NIC purposes.

Dates for the making good of payrolled benefits were set in legislation from the 2016 to 2017 tax year in Income Tax (Pay As You Earn) (Amendment) Regulations 2016 as the end of the tax year in which the benefit is provided.

From the 2017 to 2018 tax year, the taxable value and the value on which Class 1A NICs are payable is reduced only if the benefit is made good by the 6 July following the end of the tax year in which the benefit in kind is provided.

The guidance is available here.

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