P11D tips – COVID-19 and benefits in kind

P11D tips – COVID-19 and benefits in kind

Published by: Michael Hepburn, Senior Manager – Employment Tax

The COVID-19 lockdowns changed the way that many of us work, and there has, of course, be a knock-on impact on the benefits and staff support that employers provide. So what items will need to be reported on P11Ds for 2022/23

Home working costs

Where employees work from home as part of a home working policy, an employer could pay an un-receipted allowance of up to £6 per week (£26 per month) and there is no requirement to report this. However if there is no policy in place and the hybrid working is purely out of personal choice this allowance will be taxable and should be through payroll.

For 2020/21 and 2021/22 such an allowance could apply without the need for the employer to have a homeworking policy to cover the additional costs of working from home during the pandemic, but this COVID-related easement does not apply after 5 April 2022.
 

Home-working equipment 

There is a specific benefit in kind exemption which applies to ‘employer-provided’ supplies and services in the employee’s home. In order for the exemption to apply, there are two primary conditions which must be met:

  • The sole purpose for the provision is to enable the employees to perform the duties of their employment, and
  • Any private use by employees is insignificant.

Here, ‘employer-provided’ means the employer arranges and pays for the item (ie monitors, keyboards, desks and chairs, etc.). The equipment remains the property of the employer, and should subsequently be returned. However, if ownership is transferred to employees, a taxable benefit will arise and must be record on P11Ds (although the value of some second hand items may be minimal).

Mobile phone costs

Most employees who work from home regularly will need to make frequent work calls. Where a mobile phone has been provided by the business, and the contract is between the employer and supplier, no benefit arises and there are no reporting obligations.

Where employees are using their personal mobile phone:

  • Where an employee is claiming for itemised business calls, texts and data only (and this is evidenced), the cost reimbursed is not taxable.
  • Where an employee is claiming for their fixed call plan (say £30 all-inclusive calls, data, etc.), the cost will always be taxable – through payroll.
  • Where an employee is claiming for costs over and above the fixed call plan, if they can demonstrate that the additional cost relates to 100% business use, the cost reimbursed is not taxable
  • Where there is no justification for the costs being claimed, and so the business use and personal use cannot be determined, the total claim will be taxable through payroll.

Broadband 

If an employee needed a broadband connection installed as a result of needing to work from home during the pandemic, and the business arranged this during 2020/21 or 2021/22, then the costs could be tax free and not reportable on P11Ds. This does not apply for installations in 2022/23.

For employees that have an existing broadband connection, if it is not possible to split the business use and personal use, any reimbursement and employer decides to make will give rise to a benefit in kind, and the whole payment will be taxable. As with mobile phones, if the employee can split their bill and claim only for the business use element e.g. additional data requirements, etc., a reimbursement can be made with no tax implications.
 

Employer-provided COVID-19 testing for employees

The costs of such tests are not to be treated as a benefit liable to tax and NIC (a specific exemption covers these for the three tax years up to 5 April 2023). Similarly, the cost of PPE provided to employees relating to their work is non-taxable and need not be reported on P11Ds. In contrast, where employers reimburse the costs of a normal flu vaccination, this is a benefit in kind that must be reported (if not dealt with by way of a PAYE settlement agreement). 
 

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P11D is just one of the reporting deadlines that employers need to be aware of for 2022. Read our guidance on how to ensure you have accurate data ready in time to meet all the reporting deadlines: Employers’ Year End 2023

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