PAYE12035 - Coding: coding deductions and expenses: benefits in kind
Include Benefits in Kind in the code whenever you can. If they arise from a secondary source, record the benefits in kind against that employment on income, allowances, benefits and deductions. The benefits in kind will be included in the tax code for the primary employment source.
Describe different benefits as follows
- Car benefit
- Car fuel benefits
- Beneficial loan
- Medical insurance
- Van fuel benefit
- Any other as Benefits in Kind
When a new benefit is coded out for the first time, the usual procedure is to code out the actual amount for that part year, thus creating a potential underpayment (PUP) for collection in the following year.
Enter details of benefits in kind in the income, allowances, benefits and deductions area and submit the code calculation to calculate the code.
Cars, car fuel and form P46(CAR)
During the year, employers may use form P46(CAR) to make returns of car or car fuel benefits.
Any in-year changes to Car / Fuel benefit from a P46(Car) should be processed on ECS. ECS will update NPS IABD CY and CY+1 as necessary and auto code the benefit as appropriate, see PAYE130040.
It is important to maintain codes even if the record is a leaver case, to ensure continuity if a new employment commences. It is likely that any new employment would involve similar circumstances as the old employment. The automated coding process will therefore amend the code to reflect the P46(CAR) details and a P2 will be issued to the individual so that they are aware of the change.
Interest free or cheap loans
Make any necessary coding calculation following your review of the individual’s form P11D for the previous year. The Employment Income (EIM) Manual at EIM26100 onwards tells you how to calculate the benefit.
Sometimes an employer will tell you about the benefit before the end of the tax year, and may have used a more precise basis to work it out. However, this may not give the correct final result. When this happens
- Remind the employer to use the average basis when completing the P11D
- Tell the employee
- The benefit in the coding may not be final
- You will review it after 5 April
Coding benefits on form P11D that are subject to an expenses claim
When you are coding benefits from a P11D with a section 336 expenses claim, see PAYE130040.
Receipt of form P9D
Examine any completed P9D without delay and capture the details in IABD see PAYE130040.
- Consider any item shown from which the employer could not deduct tax
- Review the assessable benefit and where the amount is
- £50 or less - code out any benefit which is likely to continue. Use Week 1 basis if needed
- Over £50 - take the benefit into account in the assessing review. Revise the coding as needed