Primer: Employee Expenses and Benefits

Hunts Forum’s Finance Manager Louise Prosser provides an overview on employee expenses and benefits, particularly as we come out of lockdown.

As many employers’ think about returning to offices or reviewing long-term working arrangements there will be many things to consider, including reviewing home working and expenses policies.

The HMRC rules on employee expenses and benefits are complex and cover a wide range of areas including travel expenses, equipment for an employee to use at home, mobile phones, refreshments, gifts, entertaining and gift vouchers.

Many of these could have tax and National Insurance implications, so it is important to know what you can and cannot provide and which will require a P11D to be completed.

For the full list of expenses and benefits and the rules for them, please click here.

Here are some of the things that may affect your organisation:

Home working and providing equipment

  • While offices have been closed for Covid reasons it has been accepted by HMRC that there has been a requirement for staff to work at home and for equipment to be provided for them. However, these arrangements now need to be formalised.
  • For any additional household expenses to be paid, or the weekly allowance claimed there must be an arrangement between the employee and the employer and the employee must still work at home regularly.
  • Equipment provided must be necessary for their work, with personal use being insignificant.
  • If employees return to work in the office full time, all equipment must be returned to avoid tax implications.

Further reading:

www.gov.uk/expenses-benefits-assets-available-to-employee
www.gov.uk/expenses-and-benefits-homeworking

Mobile phones

  • An employer can provide an employee with a single mobile phone or SIM card for business use, where personal use is insignificant.
  • However, if the phone contract is in the name of the employee rather than the employer there will be a requirement to report this on a P11D and there may be tax and National insurance implications.

www.gov.uk/expenses-and-benefits-mobile-phones

Staff refreshments

  • Reasonable food and drink can be provided for an employee attending meetings or training away from their workplace.
  • Reasonable in-house food and drink that is available to all may also be provided for meetings.
  • However, if a team lunch, for example, is held at an external venue near to the office this will need to be reported to HMRC as staff entertaining. The only exception to this is for an annual function held that is open to all staff, up to £150 per head.
  • As offices re-open it may be time to review policies on where meetings are held and what refreshments are provided to staff.

www.gov.uk/expenses-and-benefits-entertainment
www.gov.uk/expenses-benefits-meals-employees-directors