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Deadline to reduce taxable benefits

Source: HM Revenue & Customs | | 28/05/2019

Employees can often reimburse their employers for benefits provided in order to lessen their taxable benefits and thereby reduce or avoid a tax charge. This is referred to in the legislation as ‘making good’ and most often involves the employee making a cash payment to their employer. The payment has the effect of reducing the taxable value of the benefit in kind, often to zero. This reimbursement process reduces the amount of the employee’s taxable earnings, and indirectly, the amount of your employer's National Insurance payments.

Any employees using this option, need to be aware of the 6 July deadline for making the reimbursement. For example, if the benefit in kind was received during the 2018-19 tax year, the deadline for making a reimbursement is normally the 6 July 2019. There are exceptions to this such as paying back private costs made on a company credit card. In these cases, the employee has to 'make good' the benefit before 1 June following the end of the tax year in which the benefit was provided.

Why keeping to these deadlines is important?

Employees can still make payments after 6 July 2019, but by doing so will not reduce the taxable value of the benefit in kind. This means the benefit will still be taxable and liable for National Insurance contributions and cannot be adjusted by the employer.

 

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McAllisters is a partnership trading from Paxton House, 11 Woodside Crescent, Glasgow providing accountancy and tax services and general business advice and is a member of ICAS (Registration No 0342) and an FCA exempt professional firm (No 301235). Its VAT number is 261 3019 94

McAllisters (Scotland) Ltd is a related business providing tax and business advisory services to McAllisters and its clients. McAllisters (Scotland) Ltd is registered in Scotland (Registration number SC146856). Its VAT number is 624 0564 62.

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