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Employers – Eye tests and the provision of glasses

Posted by: edwinsmith on January 24th, 2014

Where an employee is required to use display screen equipment (usually a computer with a Visual Display Unit -VDU) as part of his normal duties for an employer then there are tax reliefs available to the employer and employee concerning the employer payments for eye tests and the provision of glasses.

If an employee is required to use a VDU in the above circumstances then no taxable benefit will arise on the cost of

  1.    an eyesight test, and

 2.    glasses or contact lenses required solely for VDU use that the eye test shows is necessary where

the test is required under Health and Safety at work regulations and if shown to be necessary by the test.

A special prescription should be obtained for VDU use in order to take advantage of tax relief.

 Where glasses etc are for general use, but include a special prescription for VDU use, a proportion of the cost relating to the special prescription will be exempt from a taxable benefit.

The provision or payment by an employer towards the cost of glasses etc for general use, including use with a VDU, but without a special prescription for VDU will give rise to a taxable benefit.

For Class 1 National Insurance Contributions (NIC) there are similar exemptions from liability if a special prescription for VDU use is obtained in above circumstances regardless of whether employer contracts with optician or employee arranges test etc and employer reimburses them.

However if the eye test identifies a general need for glasses (as well as special prescription for VDU use) and the employer  reimburses employee for whole costs then liability for Class 1 NICs will arise on the amount exceeding VDU related prescription. This amount will effectively be treated as part of employee’s salary and PAYE/NIC calculated on this amount in normal way for salary etc.

If the employer contracts with the optician then amount paid by employer will be disregarded for Class 1 NICs but the amount exceeding VDU related prescription will need to be treated as benefit in kind to employee and entered on the relevant year end P11d forms (Employers return of benefits and expenses paid to employees). Therefore in this situation Class 1a NIC would be payable by the employer but employee would not suffer Class 1 NIC liability.

Please contact us if you would like further advice in this area.

Filed under: Benefits, Employers, Individuals, PAYE

Employer payrolled benefits and P11d forms

Posted by: edwinsmith on June 21st, 2013

Employers can make arrangements with HMRC to payroll benefits in kind. This means that benefits in kind and expenses would be put through the payroll for employees. The employees would then be taxed in ‘real time’ rather than be taxed at some future time via their PAYE tax code or if applicable through their self assessment form.

In practice the cash equivalent of the benefit in kind would be calculated on an annual basis and split over 12 months if employee paid monthly or 52 weeks if paid weekly and the appropriate amount added to the payroll.

This can be done for all benefit in kinds or the employer can choose specific benefits to be payrolled which can be agreed with HMRC.

Employers making payrolled benefits still need to complete and submit P11d forms and will be liable to penalties if forms not submitted. Detailed below is an extract from HMRC on the steps to take when submitting forms - HMRC - P11d forms

If all benefits have been payrolled and P11ds filed online.

  1. notify HMRC that you will be sending P11Ds for directors or employees where payrolling has taken place in that year, in order to avoid incorrect processing of the data - there's an HMRC online form payrolled benefits you can use to do this or you can telephone HMRC's Employer Helpline.
  2. complete the 'amount made good or from which tax deducted' boxes (where this box is available for the relevant benefit).
  3. complete the P11D(b) form as normal, ensuring that the total expenses and benefits provided are included irrespective of payrolling.

If some benefits have been payrolled for some or all employees and P11ds filed online.

  1. complete the 'amount made good or from which tax deducted' boxes (where this box is available for the relevant benefit).
  2. submit P11D information, either online/electronically or on paper for non-payrolled benefits.
  3. submit P11D information, either online/electronically or on paper for payrolled benefits, where the benefits that have been payrolled have a corresponding entry for 'amount made good or from which tax deducted'.
  4. submit separately on paper, P11D information for other payrolled benefits - these separate P11Ds and lists must be clearlymarked 'PAYROLLED' .
  5. complete the P11D(b) as normal, ensuring that the total expenses and benefits provided are included, irrespective of payrolling .

Benefits have been payrolled for some employees and paper P11ds.

  1. clearly mark all relevant paper submissions 'PAYROLLED', whether they be individual P11Ds or in list format .
  2. complete the P11D(b) as normal, ensuring that the total expenses and benefits are included, irrespective of payrolling .

Please contact us if you require any further advice on payrolling benefits in future or completing p11d forms.

Filed under: Benefits, Employers, PAYE, Tax

Child Benefit changes

Posted by: edwinsmith on November 8th, 2012

From 7 January 2013, the High Income Child Benefit charge will be introduced.  This will affect you if the following apply:

  • Either you or your partner have income over £50,000 (in a tax year), and
  • Either you or your partner is entitled to receive child benefit. 

You will also be affected if during a tax year you have an individual income of more than £50,000 and someone else is entitled to receive Child Benefit for a child who lives with you because they contribute at least an equivalent amount of Child Benefit towards the child's upkeep, for example pocket money or clothes.  NB: it doesn't matter if the child that is living with you is not your own child. 

If your household is affected, the person with the higher income may have to pay a tax charge based on the actual income and the child benefit received.  Therefore you may wish to either stop receiving the Child Benefit, or continue to receive Child Benefit and use the self assessment system to calculate the tax charge each year. 

If you choose to stop receiving your payments, this will not affect your entitlement to Child Benefit, and you should still complete a claim form if you have not already done so.  This is because Child Benefit:

  • can help you qualify for National Insurance credits that can protect your entitlement to State Pension
  • can help protect your entitlement to other benefits such as Guardian's Allowance
  • ensures your child is automatically issued with a National Insurance number before their 16th birthday

If you choose to continue receiving Child Benefit, the higher earner in the household will be subject to a tax charge each year equivalent to 1% of the Child Benefit received for every £100 of income over £50,000 in a tax year.  As such, households where the higher earner has income of £60,000 or more will receive a tax charge equal to 100% of the Child Benefit received. 

Example

Your individual adjusted net income is £54,000. You are entitled to Child Benefit for two children of £438 for the period from 7 January 2013 to 5 April 2013.

Your tax charge will be worked out as follows:

Step one: income over £50,000 = £4,000

Step two: determine the percentage rate to be applied to the result from step one, so £4,000 ÷ 100 = 40 (%)

Step three: £438 x 40% = £175

'Your tax charge will be = £175 

To estimate the High Income Child Benefit charge applicable for your household click here 

A full guide on the changes introduced by the High Income Child Benefit charge can be found on the HMRC website. 

If you are unsure whether these changes will affect your household, or to speak to one of our qualified accountants contact us

Filed under: Benefits, Self Assessment, Tax