Changing working practices as a result of COVID-19 restrictions are putting pressure on the employee benefits-in-kind (BIK) system in the UK.

Usually, benefits-in-kind are offered by employers to employees, either as an incentive to attract and retain the best talent, or through recognition of service.

For example, having a company car has taken a backseat in 2020 as more meetings are taking place virtually over platforms like Zoom.

The annual Christmas party, another example of a BIK, will be like no other this year with mass gatherings banned around the UK due to the virus.

Other taxable benefits, such as private health insurance, have understandably become more desirable than ever this year.

How are they reported and taxed?

Any taxable benefits handed out to staff during a tax year need to be reported to HMRC by the end of that tax year.

Each taxable employee benefit is calculated differently, depending on the type of expense or benefit provided.

Most taxable employee benefits are deducted through PAYE, as long as the employer has registered with HMRC before the start of the tax year.

Otherwise, employers might need to submit P11D and P11D(b) forms to HMRC for any member of staff who received taxable expenses or benefits.

This helps HMRC calculate how much you need to pay in Class 1A National Insurance contributions.

Benefits-in-kind after COVID-19

Speaking of Christmas parties, the same tax break for annual functions that you might usually apply to these can also be used for online events.

So if you want to host an online quiz or festive drinks over Zoom, for example, the same £150 per person exemption (including VAT) applies.

With company cars, things get a little more complex because of the virus. For example, if you have furloughed an employee or they are working from home, you should treat the company car as ‘available for private use’ during this period.

If you want to stop the BIK on use of the company car, HMRC will accept the vehicle is unavailable from the date the worker hands the key back to you after having their contract terminated or after 30 consecutive days.

Working from home

Most office-based employees in the UK have been working from home since 23 March 2020, when the first nationwide lockdown was imposed.

Many will have seen their household bills rise as a result of being on the computer for at least seven-and-a-half hours a day. Broadband, heating, gas, water and electricity bills in those homes have also soared.

Each person working from home can take advantage of a weekly allowance of £6 a week, or £26 a month. This is non-taxable and can be claimed through your payroll.

However, reimbursements of more than £6 a week or £26 a month will attract income tax and national insurance unless you keep records to show how the figure has been calculated.

Get in touch

Our complete payroll service can handle all of the changes to employee BIK in 2020/21 in your business, as you attempt to keep up with changing legislation following the most challenging of years.

To find out more about what our expert team can offer, email us at or call us on 0141 221 257.