WFM UK | Payroll UK: BIK Module - Credit, Debit and Charge Cards

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Overview

Credit, Debit and Charge Cards covers situations where an employer provides employees with payment cards for use in connection with company activities or for personal purposes. This benefit type is event-driven, with different tax and National Insurance consequences depending on how the card is used.

The benefit arises when the card is used, and income tax liability is generally payrolled across the tax year, with National Insurance implications depending on whether the card usage constitutes a benefit or is legitimately a business expense.

Within the BIK module, this benefit type is managed through three distinct Event Types, each with specific HMRC reporting and payroll implications:

• The card is used on the employer’s behalf, but without permission

• The card is used for business purchases, but not clearly on behalf of the employer

• The card is used for private purchases, but not clearly on behalf of the employer

Important:

• Before processing this type of benefit, please review what is exempt

• Full guidance on these situations is available on GOV.UK: Expenses and benefits – credit, debit and charge cards.

This article explains how these events should be applied with BIK module considerations and how to calculate the benefit value. See below for some other articles to assist with preparing and processing benefits in the BIK module:

• For creating this benefit type at company level, go to Configuring Company Benefits
• For applying benefits to employee records, go to Applying Benefits to Employees: Manual & Data Imports
• For how this looks in Payroll when processing, go to How Payrolled Benefits are Reflected in Payroll
• For National Insurance and Best Practices, please read the National Insurance and Income Tax Handling for Payrolled Benefits article

Contents

• BIK Module Configurations and Considerations
• Event Type: The card is used on the employer’s behalf but without permission
  • Working out the Taxable Amount
• Event Type: The card is used for business purchases, but not clearly on behalf of the employer
  • Working out the Taxable Amount
• Event Type: The card is used for private purchases, but not clearly on behalf of the employer
  • Working out the Taxable Amount

BIK Module Configurations and Considerations

Credit, debit and charge cards is technically treated as a one-off event, not a time-based benefit held over a period of time (Such as a Health plan/medical benefit). The full taxable value arises at the point of transfer and should not be reduced based on duration.

Please Note: If the benefit is a Trivial Benefit but you still wish to record this in the BIK module, then consider using the "Other" Benefit type, also selecting the event type that attracts no Income Tax or National Insurance Liability. See here for more information: BIK Module - Other Items

Company-Level Configuration

When configuring this benefit at company level: 

• Set the benefit to retain until the end of the tax year for leavers to ensure the taxable value is always fully applied.

• Since this is a single transaction, do not configure pro-rating based on duration of employment.

Employee-Level Configuration

When configuring this benefit at employee level, within the current version of the BIK module, Benefit Start and Benefit Stop dates are used to calculate pro-rated values. While this logic is appropriate for ongoing benefits, it does not automatically align with the treatment of one-off events.

• Enter the full value of the payment as the benefit value

• Set the Benefit Start and Benefit Stop dates to the full tax year to avoid incorrect pro-rating.

With this configuration, even if the employee leaves, the full taxable value of the payment will be taxed correctly.

Ongoing Enhancements

The current release of the BIK module fully supports compliant processing of this benefit type for income tax purposes. While certain behaviours, such as date-based pro-rating, require deliberate configuration for this benefit type, the correct legislative outcome can be achieved through the setup approach outlined above.

Employers can therefore operate this benefit accurately by applying the prescribed configuration.

Future enhancement phases will further refine benefit-specific behaviour to reduce manual intervention, increase automation, and more closely reflect the distinct legislative treatment of one-off benefit events such as Assets Transferred.

Event Type: The card is used on the employer’s behalf but without permission

When an employee uses a company card without authorisation for purchases, this constitutes a taxable benefit, even though the expenditure may have been intended for business purposes.

The benefit arises at the point the card is used. The taxable value is payrolled across the remaining pay periods in the tax year rather than waiting until the end of the year. Class 1 NIC applies because the employee effectively receives a cash‑like benefit.

Because this event type attracts Class 1 National Insurance, please read the National Insurance and Income Tax Handling for Payrolled Benefits article.

Working out the Taxable Amount

The taxable value (Cash Equivalent) is the full cost of the unauthorised transactions incurred on the card. Each transaction should be treated as a separate taxable event.

For example, an employee uses a card to make a £300 purchase:

£300
(Cost of unauthorised transaction)

minus

£0
(Amount paid by the employee, as a contribution toward the taxable benefit)

equals

£300
£300 is the taxable amount (or Cash Equivalent) to apply to the employee as a benefit.

Event Type: The card is used for business purchases, but not clearly on behalf of the employer

This Event Type covers situations where a company card is used for purchases that appear to be business-related, but it is unclear whether the expenditure is wholly for the employer’s purposes. Examples might include a mixed-purpose purchase or a payment where receipts do not clearly identify the business component.

Although HMRC previously required these transactions to be reported on the P11D, in most cases, no Income Tax is payable because the expenditure is considered primarily business-related. The BIK module should still record the transaction for compliance and audit purposes.

Working out the Taxable amount

There is no taxable value or amount subject to National Insurance for this Event Type, as the expenditure is considered primarily business-related.

Note: If HMRC later determines that the transaction is taxable or subject to NIC, this portion should be re-processed through either the first event type above or the next event type below.

Event Type: The card is used for private purchases, but not clearly on behalf of the employer

This Event Type covers situations where a company card is used for private expenditure, even if it is not immediately obvious that the purchase was unrelated to business purposes. Examples include purchases that appear to be work-related but are later determined to be personal.

The benefit arises at the point the card is used for private purposes. The taxable value is payrolled across the remaining pay periods, and Class 1 NIC is calculated and submitted through payroll.

Because this event type attracts Class 1 National Insurance, please read the National Insurance and Income Tax Handling for Payrolled Benefits article.

Working out the Taxable Amount

The taxable value (Cash Equivalent) is the full cost of the private expenditure paid by the employer. Each transaction should be treated as a separate taxable event.

For example, an employee uses a card to make a £250 purchase:

£250
(Cost of unauthorised transaction)

minus

£0
(Amount paid by the employee, as a contribution toward the taxable benefit)

equals

£250
£250 is the taxable amount (or Cash Equivalent) to apply to the employee as a benefit.

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