Are you completing a form P11D for this expense?
The P11d season is in full swing and we are busy preparing forms for clients to make sure that deadlines are met. Where we are aware that you are providing benefits to your staff, we write to you each year with a form to complete and then we ensure that the correct process is followed.
Recently we have been helping a few clients with their bookkeeping either because they are short of time or because they have decided to move to the cloud and let us take care of the day-to-day compliance whilst they work on their business. As a result, this process is enabling us to get a more granular insight to the headline figures and questions have been asked “are you completing a form P11d” for this expense?
The answer normally is what on earth is a form P11d? This is a form which is used to report to HM Revenue & Customs (HMRC) any taxable benefits your employee may receive by virtue of their employment. This could be goods or services. The idea is to prevent employers reducing salaries to their staff by way of providing other benefits and that is why most benefits will have tax implications.
What benefits do I need to report?
Some of the most common examples of benefits-in-kind provided are company cars/vans and private healthcare. The simpler way to define a benefit to say anything that is provided by the employer which is not “wholly, exclusively and necessarily” for the performance of the employees’ duties is potentially a taxable benefit.
So, for example a company car or van is only ever a benefit when there is personal use (or just available for personal use) because neither is necessary for carrying out the job.
What also dirties the water more is that there are some benefits which are taxable and others which are not. The rules generally ensures that any in-house facilities such as car parking, subsidised canteens, childcare at work etc are exempt. There are also rules around trivial benefit which are exempt if they cost less than £50 (covered in the Christmas giving blog last year).
The second problem is some benefits should be taxed via the monthly or weekly payroll and others can be reported via the form P11d.
HMRC has provided a very useful guide whereby you can check if what you pay for is taxable and if so how to report it.
HMRC also has the facility whereby if you are provding certain benefits to your team and you do not want them to have the tax consequences then you complete what is called a Paye Settlement Agreement (PSA). The main point is the settlement agreement is for minor or irregular benefits such as award for long service or ticket to an event.
The deadline for application for PSA is 5th July so we will have the opportunity to cover this topic in depth in a dedicated blog later this month. However, if you should have any specific questions now, please do not wait just get in touch.
How do I tell HMRC about the benefits?
Once you know if an expense you pay for your employee must be reported to HMRC, you need to complete form P11d for each employee that receives benefit/s and a form P11d(b) giving the summary of the taxable benefit and a calculation of Class 1A National Insurance (covered below).
There are two options for the actual completion of the forms:
- You can complete the forms online and submit to HMRC yourself. You use the same PAYE online service when you complete your payroll.
Contact us as we will review your expenses and complete the forms for you and advice you of your tax liability and if this can be reduced in any way.
You also have the option to payroll any benefits and the advantage would be to remove the requirement of employees’ annual forms P11d because figures will be reported monthly via the payroll. Unfortunately form P11d(b) would still be due, for the employer to pay Class 1A NIC and some benefits cannot be payrolled. This option is currently on a voluntary basis and must be made before the start of the tax year so the earliest you can opt in now is 6th April 2022.
What are the deadlines?
The deadline for submitting forms P11d and P11d(b) is 6th July following the end of the tax year. So, for the tax year 2020/2021 the deadline is 6th July 2021. Copies of the individual P11d forms must also be given to each member of staff by this date.
The deadline for the payment of class 1A National Insurance is 19th July or 22nd July if paying electronically.
How are P11d benefits taxed?
There is tax implication for both the employer and the employees. Employees should have their benefits reflected in the PAYE tax code so the correct amount of tax is deducted via payroll. If you are completing a self-assessment tax return, then you must also include the benefits on the employment pages of your return.
For employers, you need to complete a supplementary form P11d(b) alongside the P11d’s. This is basically a summary of all the taxable benefits you provide. You then pay class 1A National Insurance which is 13.8% of the total taxable benefit in kind provided by you.
Are there any exemptions due to Covid-19
There is no specific exemption as a direct result of the pandemic. However, during the first lockdown many of us stayed at home for weeks and worked from there avoiding the need to travel. Therefore, if you were not using your company car for private purpose because you had a second car for domestic chores such as shopping and other essential journeys then you may be able to apply for exemption if you did not use the car for a period of at least 30 days.
However, HMRC will want a lot of proof from you to justify this exemption and our advice would be to exercise caution. Examples of proof might be cars returned to the company premises with the keys, or a policy email/ document at the beginning of lockdown stating the company vehicle must not be used for personal journeys.
Any testing kits provided for Coronavirus is not a taxable benefit although initially HMRC had stated that it would be. Similarly, any PPE provided at work is also exempt.
I think I might be caught by the rules but have not done anything yet
As is common with all taxes late filing carries a penalty. There will be penalty for late filing and a penalty for late payment of Class 1A NIC.
The penalty for non-submission of the forms is £100 per month (or part of) for every 50 employees. For non-payment of tax the penalties and interest are the same as late payment for your PAYE.
You may also face fines if your P11d forms are incomplete or incorrect, so it is best to seek advice when you are not sure.
If you would like to discuss any specific areas that you are not sure of then please get in touch with us. If you are not already a client please email me directly at firstname.lastname@example.org