Benefits-in-kind reporting can change where an employee reimburses the employer for all or part of a taxable benefit, commonly described as “making good”. A valid payment can reduce the taxable cash equivalent of the benefit, sometimes to nil, but the timing matters. A payment made after the statutory deadline does not ordinarily rewrite the earlier benefit charge simply because the employer and employee intended that the cost should ultimately be reimbursed.
Employers should therefore distinguish amounts reimbursed during the tax year, amounts paid shortly afterwards within the permitted period and payments made too late to affect the tax calculation.
How benefits-in-kind reporting is affected by making good
Making good normally requires the employee to provide measurable value to the person who supplied the benefit. Most commonly this is a direct cash payment, a deduction from net salary or a valid debit to the employee’s current account with the employer.
The HMRC definition of making good confirms that the payment must genuinely be made in return for the benefit. Providing additional services to the employer is not sufficient.
Where the ordinary benefits code applies, the taxable cash equivalent is broadly the relevant cost or statutory value less amounts validly made good by the employee.
The employer should therefore record both the original value and the reimbursement rather than simply netting transactions in the expense ledger without explanation.
Benefits-in-kind reporting after the 6 July making-good deadline
For non-payrolled benefits, the general deadline for making good is 6 July following the end of the tax year.
HMRC’s making-good deadline for non-payrolled benefits confirms that a reimbursement after 6 July will not ordinarily reduce the taxable value or the Class 1A National Insurance liability for the earlier year.
If an employee receives a taxable benefit costing £2,000 during 2026/27 and reimburses £1,500 by 6 July 2027, the remaining taxable value may be reduced to £500, subject to the particular benefit rules.
If the £1,500 is first reimbursed in August 2027, the payment is generally too late to reduce the 2026/27 benefit.
Employers should therefore reconcile outstanding employee contributions immediately after 5 April rather than waiting until the P11D preparation process is nearly complete.
Payrolled benefits can have earlier deadlines
Benefits voluntarily taxed through payroll operate under different making-good deadlines.
Under the current rules, most voluntarily payrolled benefits must generally be made good by the final payday of the tax year if the reimbursement is to reduce the payrolled value. Special timing rules apply to certain benefits, including car fuel and van fuel.
This distinction is easy to overlook where an employer payrolls some benefits but reports others on P11D.
The payroll team should therefore know before the year end which benefits are being payrolled and whether employee contributions have actually been collected.
Fuel benefits require particular caution
Company car fuel does not operate as a simple pound-for-pound taxable benefit.
Where private fuel is provided, the statutory fuel benefit can arise in full unless the employee is required to make good the entire cost of private fuel and actually does so within the permitted period. A partial reimbursement does not proportionately reduce the statutory fuel benefit.
Employers allowing staff to reimburse private fuel should therefore maintain reliable mileage records and calculate the amount due using an appropriate method rather than accepting occasional contributions.
Real-time benefit reporting is changing from April 2027
The administrative environment is also changing. From 6 April 2027, mandatory real-time payrolling is due to begin for company cars, car fuel, vans, van fuel and employer-provided medical benefits. Most other benefits are scheduled to follow from April 2028, while employer-provided loans and accommodation remain outside the mandatory timetable pending further decisions.
This makes year-end reimbursement controls increasingly important because benefit information will progressively move into payroll rather than being corrected only through annual P11Ds.
Employers should incorporate employee reimbursements into their payroll and PAYE procedures before the relevant deadline. Complex remuneration arrangements involving cars, medical insurance, accommodation or director benefits should be reviewed through specialist tax advice rather than assuming that a later reimbursement automatically removes the original tax charge.
Disclaimer: This article is provided for general guidance only and does not constitute personal tax, legal or financial advice. The correct tax treatment depends on the specific facts, applicable legislation and HMRC practice at the relevant time. You should contact us for advice tailored to your circumstances before taking or refraining from any action.
