Last updated: 02/06/2020
All employers who provide taxable benefits to their directors & employees are required to submit an end-of-year report of those benefits to HMRC, this is known as P11D form. This article will run through what businesses need to understand about P11D forms to assist with completing these.
What are P11D forms?
A P11D form gives you an idea of the cash value of any work-related and taxable expenses and taxable benefits that you have received over the tax year. A P11D form is sent to HMRC by UK employers. Because such benefits may increase the amount of tax an employee has to pay, it’s important that they are reported to HMRC.
Also, UK employers have to pay Class 1A National Insurance Contributions at 13.8% for the provision of most benefits. The calculation of this liability is detailed on the P11D(b) form.
Who needs to file a P11D?
P11D forms are filed by the employer and not the employee.
At the end of the tax year, an employer will usually need to submit a P11D form to HMRC for every employee they have provided with non-business related expenses or benefits.
If you are paying tax on all employees benefits through your payroll, you will not usually need to submit a P11D form.
What are P11D benefits?
P11D benefits include items or services which you (or your employees) receive from the business in addition to salary. They include:
- Assets paid for by the company and transferred an employee below market value or at no cost
- Assets placed at your disposal such as holiday homes
- Cars, vans and/or fuel provided by the company for private use (where vans are provided, incidental private use is allowed)
- Company credit cards where they have been used to fund personal expenditure
- Healthcare, such as private medical or dental insurance
- Living accommodation
- Low or interest-free loans, (sometimes referred to as director’s loans)
- Mileage Allowances that are more than HMRC’s approved rates
- Mobile phones (unless the contract is in the company’s name)
- Payments made on an employee’s behalf (such as paying personal bills from the company account)
- Professional fees and subscriptions (although subscriptions to certain professional bodies may be exempt)
- Vouchers (for childcare vouchers, this is for any excess over £55 per week)
You do not have to report some routine employee expenses to HMRC. These are known as exemptions. These include:
- Business travel
- Phone bills
- Business entertainment expenses
- Uniform and tools for work
For these exemptions to qualify, you must either:
- Pay a flat rate to your employee as part of their earnings, which must be either a ‘benchmark rate’ or a special (‘bespoke’) rate approved by HMRC
- Be paying back the employee’s actual cost for these
When is the deadline for P11D forms?
For the tax year 6th April 2019 – 5th April 2020, the deadline for P11D forms is 6th July 2020. As this process of gathering all the necessary information can take a while, it’s important that you get started now if you’ve not already.
What are the penalties for missing the P11D deadline?
Penalties are payable for non-submission and late submissions. The UK government states that “you will receive a penalty of £100 per 50 employees for each month or part month your P11D(b) is late and charged penalties and interest if you’re late paying HMRC”.
Furthermore, there are additional penalties for submitting incorrect P11D forms. This is based on a percentage of the potential revenue lost according to the taxpayer behaviour and degree of culpability or guilt, which can be up to 100% of the tax owed.
PAYE compliance is becoming more complex, and it is an area that HMRC view as a target for generating additional revenue, both in taxes and, more importantly, penalties. Consequently, all employers should ensure that their systems and procedures are robust and would stand up to inspection.
Common mistakes include the treatment of, pool cars, company vehicles and the provision of benefits for staff. Failure to declare payments made to staff for travel, subsistence and entertaining expenses often occurs where there is no private use, yet a dispensation has not been requested and obtained.
Accountants for P11D in Manchester
If you would like any help with filling a P11D, the calculation of the associated Class 1A NIC, or any other forms of tax advice, get in touch with our friendly team of experts here at Alexander & Co.