Making good cost of benefits

What happens if the employer is reimbursed costs after the July deadline for making good?

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The company has bought goods for the personal use of the director and these were reported on the P11d.  The director now doesn't want the benefit in kind charge so wants to make good the costs.  HMRC's position seems clear to me that the benefit in kind charges still stand so there will be no reimbursement of the personal tax and the NI charges.

What happens if he still goes ahead and repays the costs? I am assuming that there is a corporation tax charge on the amount he pays to the company.  Is there anything else to consider?

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By The Dullard
15th Apr 2022 12:42

Why not go to HMRC's Employment Income Manual and type "making good" in the "Search this manual" box?

The 7th and 8th hits down lead you to EIM21119 and EIM21121, which probably have the answer you seek between them. Some of the other hits may deal with the specific matter you're considering.

It would have been considerably quicker than typing your question, and when you take into account all of the time of all of the people that will consider your post, it would have been a massive efficiency.

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Replying to The Dullard:
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By Paula@Butt
15th Apr 2022 14:01

Thank you for taking the time to read and respond, but my question is not whether or not the client can make good and avoid the tax and NI on the benefit, but the implications of what would happen if he did now make good after the time has elapsed for it to be effective for tax purposes.

I know that to the likes of you and I it would make no sense to do this based on the fact that it won't avoid the BIK taxes, but I am dealing with a very specific set of circumstances and there are some clients that you need to protect from themselves.

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Replying to Paula@Butt:
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By DKB-Sheffield
15th Apr 2022 23:36

Paula-AT-[*** wrote:
]

I know that to the likes of you and I it would make no sense to do this based on the fact that it won't avoid the BIK taxes, but I am dealing with a very specific set of circumstances and there are some clients that you need to protect from themselves.

It doesn't make sense to me either?!

Are you suggesting...

1. The director repay the money, I assume by raising a 'charge' (taxable to CT? or - perhaps better viewed along the lines of - reversing the prior CT relief obtained?)...

2. For which he and the company has already suffered tax and NI relating to the BIK...

3. Despite knowing the client contribution will not result in 'removing' the BIK...

4. To 'protect him from himself' (which I think I'm reading as "teach him a lesson")...

???

I'm stumped... or maybe I'm egg bound?

OR... are you asking (perhaps) if the *late* 'making good' contribution for 2020/21 can be classed as a 'making good' contribution for 2021/22?

The first scenario seems unprofessional (even potentially unethical). The second scenario... may well be a *good* (and answerable) question!

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RLI
By lionofludesch
15th Apr 2022 14:24

I don't get it.

Why does the director think he's better off paying the bik back rather than just the tax on it ? What's his marginal rate ?

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By David Ex
15th Apr 2022 17:17

CR DLA

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Replying to David Ex:
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By lionofludesch
15th Apr 2022 17:30

David Ex wrote:

CR DLA

Then he hasn't made it good, has he? Company no better off - it has more money but owes the director more money.

I would say that if he genuinely wants to make good the bik, the money should be credited to cancel out the original debits in the company's accounts. But, sadly, he's still stuck with the tax bill because he's out of time.

I suggest he reconsiders his unnatural urge to repay this money but it's up to him, obviously.

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Replying to lionofludesch:
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By David Ex
15th Apr 2022 18:30

lionofludesch wrote:

Then he hasn't made it good, has he? Company no better off - it has more money but owes the director more money.

I was just trying to make it stop!! Point is there is no obvious benefit in “making good” so if the director feels better writing a cheque to the company, he can do so without creating further issues.

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