How to make employee benefits easy at the end of the tax year with a spend management solution

The UK tax year (or fiscal year) is important because it determines when individual tax liabilities are assessed and when tax returns must be filed. It also affects the timing of tax payments and the eligibility for certain tax allowances and deductions. Therefore, it's essential for individuals and companies operating in the UK to get a good understanding of their financial year vs fiscal year obligations to ensure they comply with any requirements and avoid penalties.

What's the difference between the end of a company's financial year and the end of the UK fiscal year?

A company year end is the end of a company's financial year, which is the period for which the company prepares its financial statements. The company year-end can be any date chosen by the company and is not necessarily the same as the tax year-end.

On the other hand, the tax year end is the end of the UK tax year, which runs from April 6th to April 5th of the following year. It is when individuals are assessed for tax purposes by HM Revenue & Customs (HMRC).

At a company year-end, a business will prepare its financial statements, including its profit and loss account, balance sheet, and cash flow statement. And the company will use these financial statements to determine its financial position and performance over the year.

At the tax year end, HMRC checks that the correct tax amount has been collected for each taxpayer. It also sends out Personal Tax Summaries to most people in employment so they can check that they have been taxed correctly.

P11D forms are "used by employers to annually report certain expenses and benefits paid or made available to directors and employees. It is designed to provide HMRC with details of specific taxable benefits in kind which cannot, or the employer has chosen not, to be included in the payroll and subject to PAYE and NIC deduction during the course of a year."

In summary, while a company year-end and tax year-end are related to the financial affairs of a company, the former relates to financial statements, and the latter refers to tax calculations and payments.

How are UK businesses affected by the end of the tax year?

The end of the tax year in the UK can have several significant impacts on businesses operating in the country. Here are just two of the ways in which companies are affected:

Budget planning: The end of the tax year is a good time for businesses to review their financial performance over the past year and plan their budgets for the next. This can include setting targets for revenue, expenses, and capital expenditure
Employee benefits: If a business offers certain employee benefits, such as pensions, share schemes, or company cars, the end of the tax year can affect how these are taxed and reported to HMRC

In summary, the end of the tax year can significantly impact UK businesses, from tax filings and payments to budget planning and capital allowances. Companies must stay on top of these deadlines and requirements to avoid any potential penalties or negative impacts on their financial performance.

Employee benefits and the advantages of all-in-one spend management solution

At Payhawk, we offer a complete spend management solution, including corporate cards and expense management software. We don't do payroll; instead, we focus on supporting businesses to manage, track, and control their payments, reimbursements, and more.

However, as mentioned above, our solution has some links to payroll when you consider benefits in kind (benefits that make a difference to employees' gross salaries). If your employees enjoy business-provided gym memberships, medical insurance, travel, and other benefits in kind, then you could track and monitor this better with Payhawk.

At Payhawk, our all-in-one spend management solution helps you and your finance team crack any complexity around types of expenses and understand where they sit. This adds a lot of value as it enables you to understand your reporting as it relates to both your company's year-end and the UK fiscal year-end.

Expenses and custom fields

Take, for example, if your Sales Manager, Robbie, travels to work and pays with his corporate card. In this respect, it has become a benefit in kind.

All Robbie needs to do is pay for his train journey with the card, take a photo of the receipt, and upload it to the Payhawk expense management app. Once uploaded, he can select a category (from a list the finance team has predefined and add any relevant details). Robbie's colleagues in the finance team can see what he's spent and on what in real-time and even see in which category his spend falls.

Our solution can help track and report on the above by letting you define the expense categories and custom fields (like the ones selected by Robbie) for expenses within the app and platform.

Expense categories

Your finance team could create an expense category called 'benefit in kind' within the platform and add this as a category code within your integrated accounting system or ERP so you can track all expenses within this code.

UK art fabrication company MDM Props love the categorisation within Payhawk. It has helped them understand their project spend and find ways to update their overall strategy and budget management.

"Each cardholder codes up the job themselves to see where their costs are going," explains Finance Manager Uchenna. "This is important because it keeps all the information in one place and pulls all the project budget spend info together to see what we can improve. Also, we now have the time to proactively do project analysis because we're no longer chasing receipts!"

Custom fields

Or, your finance team could create custom fields within the app for all the types of ‘benefit in kind.’ These could just be accessible for the finance team so as not to disrupt a cardholder's user journey, and could include things like, staff welfare, travel, health and wellness and so on. You’re not damaging the user experience as you can include in other categories.

Payhawk + VAT reclaims

At Payhawk, we also support customer VAT reclaims (which could be relevant for your business at the same time as the tax year end, depending on whether you pay monthly or quarterly). Our easy receipt capture via smart OCR technology, categorisation, and even receipt chasing helps ensure that customers have all the spend data they need to properly file their VAT reclaims.

German automotive customer ATU saved over 2 million euros in one year thanks to nailing their spend capture and categorisation.

"We no longer have to chase receipts. Since using Payhawk, managers must simply take a picture of their receipt — thus digitising it — and enter it into the automated finance system," Mathias Goetz Senior Project Manager at ATU, says. "In the first year, this change resulted in ATU recouping € 2 million from the tax office that would have otherwise been lost."

We also integrate with international VAT reclaims company 60dias to make claiming even backdated VAT simple and straightforward.

Book a demo today to learn more about how Payhawk could help you control and manage business payments.