Work hotel stays as a taxable benefit - confused how this actually works

martin2345uk

Hi all,

As part of my job I often have to stay in a hotel, paid for by work, in order to be able to get into central London before public transport starts up.

Although this is paid by the company, it is a taxable benefit, but it's the mechanics of this that are confusing me.

What seems to happen is, my "Payments" section of the payslip includes something called "Hotel compensation", and then my Taxable Pay is slightly higher than my Gross Pay.

I did email Payroll to ask how it works and this is the reply I got but I am none the wiser, so before going back to them I thought I would just see if anyone here can give me an idea what's actually happening!

OK so the Hotel Compensation is the refund in Tax that we give you when you stay at the Hotel for work.

Hotel Stays used to be put on a P11D but we now payroll them so that you pay the Tax via the payroll rather than having your Tax Codes changed…..

We receive each month confirmation of the stays and amount due on the stays,

These are actioned on the system and the total amount is added to your Taxable Pay.

We run the payroll before these amounts are actioned and after so we can establish the amount of Tax you would pay on these stays and then we refund this value to you.

This is a Taxable Benefit so as I said before the amounts will be added to your Taxable Pay, you just won’t actually pay the Tax on them…

Thanks in advance!

elsien

Basically they are making sure you are not paying tax on your expenses. Which bit of the explanation are you having difficulty with?

martin2345uk

I guess I just don't understand how it is a "taxable benefit" if they are trying to do it so that I don't pay tax on it...?

Undervalued

martin2345uk said:

I guess I just don't understand how it is a "taxable benefit" if they are trying to do it so that I don't pay tax on it...?

When you are staying in a hotel at your employer's expense you must have some savings on living expenses, if only the food you would have eaten at home! You also save the cost of travelling to your office etc.

DullGreyGuy

elsien said:

Basically they are making sure you are not paying tax on your expenses. Which bit of the explanation are you having difficulty with?

The OP does pay tax on it as any assistance with commuting to your place of work is a taxable benefit. 


Would need to see the full payslip but by the sounds of it you have a "taxable pay" which is what is used to calculate how much tax is to be deducted and then these deductions are being made from your Gross Pay. As the former is higher you are paying more tax than you ordinarily would to reflect the benefit of the hotel room. 

Alternatively speak to your HR/Payroll team to confirm how it's working. 

mybestattempt

martin2345uk said:

Hi all,

As part of my job I often have to stay in a hotel, paid for by work, in order to be able to get into central London before public transport starts up.

Although this is paid by the company, it is a taxable benefit, but it's the mechanics of this that are confusing me.

What seems to happen is, my "Payments" section of the payslip includes something called "Hotel compensation", and then my Taxable Pay is slightly higher than my Gross Pay.

I did email Payroll to ask how it works and this is the reply I got but I am none the wiser, so before going back to them I thought I would just see if anyone here can give me an idea what's actually happening!

OK so the Hotel Compensation is the refund in Tax that we give you when you stay at the Hotel for work.

Hotel Stays used to be put on a P11D but we now payroll them so that you pay the Tax via the payroll rather than having your Tax Codes changed…..

We receive each month confirmation of the stays and amount due on the stays,

These are actioned on the system and the total amount is added to your Taxable Pay.

We run the payroll before these amounts are actioned and after so we can establish the amount of Tax you would pay on these stays and then we refund this value to you.

This is a Taxable Benefit so as I said before the amounts will be added to your Taxable Pay, you just won’t actually pay the Tax on them…

Thanks in advance!

It seems your employer may have an agreement with HMRC that any hotel expenses they pay for these trips, although strictly assessable to tax, are matched by the same amount which could be claimed by you as allowable expenses, effectively cancelling it out so no tax liability would arise. 

I think this is referred to as an approved exemption.

Perhaps check that out with your employer.

There are also PSAs (PAYE Settlement Agreements) if your employer pays tax due on incidental payments to you which aren't allowable expenses.

Andy_L

martin2345uk said:

I guess I just don't understand how it is a "taxable benefit" if they are trying to do it so that I don't pay tax on it...?

it is taxable (because HMRC deem it to be) but your employer is choosing to pay you the amount of tax due extra so you aren't out of pocket as a result of that tax. Its called "grossing-up"

https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye72028