A Benefit in Kind (BIK), also known as a fringe benefit or a non-cash benefit, is a non-salary benefit provided to employees by their employers. These benefits are monetary and are considered part of an employee’s overall remuneration package. Because they have value, they are subject to taxation. The tax treatment of BIKs depends on the specific benefit provided and its value.

Examples of common Benefits in Kind include:

1. Company cars: If an employee is provided with a company car for personal use, its value and emissions level are considered to determine the taxable benefit.
2. Private medical insurance: If an employer provides private medical insurance coverage for an employee and their family, the cost of the insurance premiums is considered a taxable benefit.
3. Interest-free or low-interest loans: If an employee receives a loan from their employer with a low or zero interest rate, the difference between the interest paid and the interest that would have been paid at the official rate set by HMRC is considered a taxable benefit.
4. Accommodation: If an employer provides an employee with accommodation, the rental or annual value of the property is considered a taxable benefit.
5. Childcare vouchers: If an employer provides childcare vouchers or directly pays for childcare, the value of the vouchers or the cost of the childcare is considered a taxable benefit, subject to certain exemptions and limits.
6. Gym memberships: If an employer provides a gym membership, the membership cost is considered a taxable benefit.

The tax liability for Benefits in Kind:

For employees: Employees pay tax on the value of the Benefit in Kind they receive. The value of the benefit is added to their taxable income and is subject to income tax at their marginal rate (i.e., basic, higher, or additional rate). The tax is usually collected through the PAYE system, with an adjustment to the employee’s tax code.

For employers: Employers are required to pay Class 1A National Insurance contributions (NICs) on most Benefits in Kind. The rate for Class 1A NICs is 13.8% of the total value of the benefits provided to the employees. However, employers do not pay Class 1A NICs on benefits subject to Class 1 NICs, such as certain cash vouchers.

To report Benefits in Kind to HMRC, employers must complete a P11D form for each employee receiving benefits and submit them to HMRC by July 6th, following the end of the tax year. Employers must also submit a P11D(b) form to report the total value of the benefits provided and the Class 1A NICs due. It’s important to note that the tax treatment of Benefits in Kind can be complex and may vary depending on the specific benefit and individual circumstances. Therefore, employers and employees should consult the HMRC website or seek professional advice for accurate information and guidance.