Many employees were required to work at home in 2020. Their employers may have helped facilitate this by providing equipment or paying to boost their home internet service. Generally, these costs are not taxable on the employee if there is no significant private use of the asset or service.
Other benefits, such as company cars, remain taxable even if the employee was furloughed. We can help you check which benefits are taxable and which are tax-free in 2020/21.
In some cases, an employee can avoid being taxed on a benefit if they ‘make good’ the value of benefit by reimbursing their employer. There are strict time limits for doing this.
All reimbursements of taxable nonpayrolled benefits for 2020/21 must be made by 6 July 2021, which aligns with the date for submitting the forms P11D.
The dates for making good on payrolled benefits-in-kind provided in 2020/21 are:
• 1 June 2021 for the value of road fuel used
• 5 April 2021 for all other benefits
The deadlines for making good specifically do not apply to interest payable on beneficial loans and overdrawn directors’ loan accounts. Where such loans exceed £10,000 at any point in the tax year there is a taxable benefit if insufficient interest is paid. This taxable benefit can be avoided if interest at least equal to the Official Rate is reimbursed, where the borrower is contractually obliged to pay it. The Official Rate for 2020/21 is 2.25%.
Despite the exclusion for beneficial loans, most people should try to pay any interest due on a loan by the 6 July following the tax year, to avoid any doubt as to whether a benefit arises at the time the P11D form is being prepared.