Reduce the pain of P11D

Notifying HMRC of employees’ expenses and benefits can be a lengthy process for any employer.

Ian Orgill and Nicola Roby highlight the recent changes to the P11D,  their top tips for ensuring a smooth application and how  to minimise the administrative burden placed on payroll.

What is a P11D?

A P11D is a form used to disclose to HMRC the expenses and benefits an employee or director have received in a tax year. Examples of which include:

  • Private healthcare
  • Company cars and in some cases, vans
  • Non- business-related expenses for travel and entertainment
  • Personal use of assets provided by employer

The form is completed once a year and one is prepared for every employee receiving benefits and or expenses.

A P11D(b) is completed to report the Class 1a NIC due on the beneficial payments.

P11Ds are due for filing together with any payment for class 1a NIC by no later than 6th July.

 

 

1. From 6th April 2017 an exemption was brought in to cover any “routine employee expenses” meaning you don’t have to report certain business expenses and benefits, for example:

  • business travel
  • phone bills
  • business entertainment expenses
  • uniform and tools for work

2. Optional remuneration arrangements will be taxed the higher of the salary forgone or the taxable benefit in kind. However, this will not apply for:

  • Employer provided pension saving
  • Employer provided pension advice
  • Childcare vouchers
  • Workplace nurseries
  • Directly contracted childcare
  • Cycle to work schemes
  • Ultra-low emission vehicles (ULEV) <75g CO2/km

3. A new £500 exemption for employer paid pension advice was introduced

 

  • Company cars – have to be reported within certain deadlines https://www.gov.uk/tell-hmrc-company-car
  • Company car – inside or outside the company? Ask your accountant. Whilst the associated running costs are tax deductible in the company, if you are a small business owner the car costs could be extracted personally incurring a lower rate of tax.
  • Tax arrears – directors or employees – could have tax arrears if a change or issue of company car is not reported. This would be collected either via self-assessment or through an amended tax code.
  • Mobile phones – If the phone contract is a personal one and the company is reimbursing, ensure the reimbursement only covers the business usage of the phone.
  • Fuel – if the company pays for fuel and is not reimbursed for private use by the employee or director, the fuel benefit will require reporting on the P11D.
  • Away from home expenses – if these are greater than the revenue approved benchmark scale rate, the additional payments require reporting on a P11D and could be subject to tax.

 

 

 

  1. Ensure a P46 car form is completed a soon as a company car is acquired. It can be reported online here https://www.gov.uk/tell-hmrc-company-car
  2. A company car tax calculator is provided free on line to work out how much tax you would pay http://cccfcalculator.hmrc.gov.uk/CCF0.aspx
  3. Only provide payments to employees in line with the HMRC’s approved benchmark rates https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim05231
  4. Review mobile phone contracts and where possible renew in the company name to avoid any beneficial payments
  5. If you are a business owner and considering a new car, consider the net cost. A company car tax report takes into consideration all associated costs after tax and compares either a corporate car arrangement versus a personal extraction to cover the costs. Contact CHW for a car tax report quote
  6. If you are a business owner, take advantage of the new exemption for employer financed pension advice of up to £500. The scheme has to be available to all employees, but can help make more informed decisions relating to your pensions. Speak to somebody at CHW to find out more
  7. Utilise your personal tax account and encourage staff to do the same. Everybody has an online personal tax account, where you can view your up to date tax position. Tax coding notices will be here so any changes can be identified and prevent any delays in addressing coding notices. Follow the link https://www.gov.uk/personal-tax-account
  8. Engage an accountant to complete your P11D. We will be sending checklists round to all our clients. Prices start at £150 plus vat for the first P11D and P11D(b) and £75 plus vat for every P11D thereafter.

 

If you are having any difficulties with completing your P11D, feel free to call the team who will be happy to help on 01204 534 031 or via our contact us page.

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