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Taxed Award Schemes
29 April 16 | By: Jas Jhooty
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Some companies set up incentive schemes to encourage their employees, or employees of a retailer, to sell more of their own goods and services. While this makes good commercial sense there is a resulting tax & NIC liability arising on the provision of awards made under these types of schemes.
The Taxed Award Scheme (TAS) mechanism has been around for over 30 years and it was designed to enable employers to settle the income tax and NIC on cash and non-cash awards to employees, so that they can receive them tax and NIC-free. Since then they have been largely superseded by the introduction of PAYE Settlement Agreements but they still are the only option available to third party providers of awards, unable to take advantage of the PAYE Settlement Agreement procedures to settle the associated employee liabilities.
Entering into a TAS scheme
All arrangements must be registered with the HMRC Incentive Award Unit by the employer or other provider of the benefit.
HMRC Incentive Award Unit
National Insurance Contributions & Employer Office
Revenue & Customs
Telephone number – 0300 200 3200
The award provider enters into a contract to pay the employees’ income tax and NIC, and separate contracts are required for basic rate schemes and for higher rate schemes. The tax and NIC are calculated on the grossed-up taxable amount of the award.
Grossing up for NIC purposes
There is Class 1 NIC liability that is due on the grossed up amount of any award made under a TAS. This is similar to the position with Class 1B NIC due on PAYE Settlement Agreements due on the grossed up amount of items covered by the agreement.
Reporting and Payment
Scheme awards are reported by the provider to HMRC on specific TAS forms as follows:
Form P35 TAS
The year end tax and NIC report form P35 TAS showing the total amount of tax and NIC paid in respect of the scheme must be filed by the provider with HMRC by 19th May following the end of the tax year concerned.
Form P440 is submitted to HMRC by 6 July after the end of the tax year and it shows the names and full details of each recipient of one or more TAS awards under the scheme, with a total value of more than £1,000 for the tax year. Where awards total £1,000 or less, the Form P440 only requires details of the number of awards, their total value and the total tax due.
Form P443 is the tax certificate that must be given to each recipient of a TAS award, showing the total value of the awards to the individual for the tax year and the amount of tax paid on them by the provider.
The income tax and NIC due under a Taxed Award Scheme must be paid to HMRC by 19th July following the end of the tax year for which the award is assessable. If the employee’s overall income tax liability is lower than the tax deducted, a refund can be made direct to the individual taxpayer through the self-assessment process.
How emTax can help?
The Taxed Award Scheme is a useful mechanism to settle the tax and NIC liabilities due on any awards made to employees of a third party for any incentive awards made to them as an incentive to increase your sales. If you require any assistance in entering into a Taxed Award Scheme or calculating the tax and NIC due on any awards made under such a scheme, please do not hesitate to contact us.