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Loans provided to Employees

Loans provided to Employees

A loan provided to an employee from an employer is not earned income; the sum paid to the employee is expected to be repaid in full to the employer’s company, most likely from the net pay of the employee’s wages as an agreed salary sacrifice arrangement. These loans are called beneficial loans and they can be arranged by the employer or a company the employer controls, by a company that controls the employing business or by someone else who has a material interest in the company.

Payrolling employee benefits
An employer has the option of paying for expenses and benefits for their employees, such as providing a company car and paying for the mileage travelled, or medical insurance and childcare; these are only examples and are not the only expenses an employer can contribute to. Any payments on benefits and expenses will have to be declared to HMRC and Class 1A National Insurance (NI) will need to be paid.
Understanding tips and troncs
Tips are usually voluntary payments made to employees by a customer; tips are paid voluntarily and are not required as per the customer’s receipt, and so there is no VAT to be paid on these. If an organization includes a service charge on their invoices or receipts, which a customer is expected to pay, then these are not classed as voluntary payments and VAT is applied at a standard rate.
Payroll submission – FPS and EPS
The monthly, or weekly, pay information must be sent to HMRC before the employee’s pay reaches them. The information on salary, wages, taxes and deductions must be with HMRC by the 19th of each month, with PAYE tax payments reaching HMRC by the 22nd of the month. Payslips must be either printed out or electronically passed on to the employees, and must show the total gross wages, tax, NI and other deductions, and the net wages that will be paid to the employee. Other information will vary depending on software used and if the payroll team make custom changes.
PAYE Job Expenses
For many UK residents in PAYE employment, there will be some expenses incurred in their profession which may be required for the role. Usually, provided the expenses are incurred wholly for business purposes, the costs can be reclaimed to claim reliefs against income tax.

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