As an employer, you may provide your employees with benefits or expenses in addition to their salary. Many of these benefits and expenses are classed as taxable and must be reported to HMRC.
A form called a P11D is completed to report the cash value of these expenses and benefits to HMRC. It is then calculated how much income tax and employer’s National Insurance contributions (NICs) are owed as a result and usually a change of tax code is issued to recover the tax.
Who is a P11D Form For?
As a UK employer, you are legally responsible for filing P11D forms with HMRC. You must complete an individual P11D form for every employee and director, who earns over £8,500 per year and in receipt of company benefits
What is the Deadline
These reports must be submitted to HMRC by 6th July following the end of the tax year. For example, the 2021–22 tax year ends on 6th April 2022. Your P11D forms must be submitted by 6th July 2022. If you file your P11D’s late, there will be a penalty issued from HMRC which starts at £300 and increases daily by £60 until the P11D’s are submitted.
What Does a P11D Form Include?
You must report details of any expense payments, benefits, and facilities given to employees, directors or their “family or household”. HMRC is very clear in its definition of “family or household”. They are employees’ or directors’:
Spouse or civil partner
Sons and daughters and their spouses or civil partners
His or her parents
Servants
Dependents
Guests
The type of facility, benefit, or expense includes, but isn’t limited to:
Private medical insurance or treatment
Living accommodation
Relocation costs
Mileage and fuel payments
Credit cards and vouchers
Transference of business assets to employees (e.g., goods or company cars)
Beneficial loans: From the company, with low or interest-free loans
Payments made by the business on behalf of the employee or director
To assist with calculating the cash value of benefits and expenses, the HMRC has ‘Working Sheets’ you can use:
Living accommodation
Cars and car fuel
Vans
Interest-free and low interest loans
Relocation expenses
Mileage allowance payments
In addition to the above, you will also be required to include details about the employer and specific details about the employee – all of which you would typically hold within their payroll record.
P11D Exemptions
There’s a list of common business expenses that don’t have to be included on your P11D forms. These include:
business travel
phone bills
business entertainment expenses
uniform and tools for work
To qualify for an exemption, you must be either:
paying a flat rate to your employee as part of their earnings - this must be either a benchmark rate or a special (‘bespoke’) rate approved by HMRC
paying back the employee’s actual costs
How Do I Submit P11D Forms?
There are options for P11D form submission:
HMRC’s PAYE online service if you have no more than 500 employees
Commercial payroll software
Paper P11Ds and P11D(b)s and posted (these are only to be used if you can’t access the online methods)
You must give your employees and directors copies of their P11D forms for their records by the 6th July following the end of the tax year. You can provide them electronically or as a hard copy. This is especially important if they are required to complete a Self Assessment tax return.
Who Pays the P11D Tax Bill?
The tax owed on benefits and expenses is paid by your employees. Usually, HMRC adjusts an employee’s tax code to capture the extra tax which is then collected via payroll and paid over to HMRC.
Once the HMRC have received the P11D forms and issued out revised tax codes, we would always suggest that employees check their coding notices to ensure they are correct and there are no surprises. If the figures detailed are not what is expected, we would suggest getting in touch with HMRC as soon as possible to ensure any mistakes are rectified as quickly as possible.
As an employer there is also Class 1A NICs payable on the taxable benefits and expenses. Which leads us nicely onto form P11D(b)
Form P11D(b)
You must fill in form P11D(b) to tell HMRC how much Class 1A NICs is due on all the expenses and benefits given to employees and directors. This payment must be made online by 22nd July, after the end of the tax year.
Form P11D(b) must be completed whenever there is a requirement to submit P11D forms or if an employer payrolls any benefits and expenses. Only one P11D(b) for is require which summaries the P11D totals for the tax year.
Is There a Way to Give Employee Benefits Without the P11D Paperwork?
You can register for ‘Payrolling Benefits in Kind’ which means the majority of benefits and expenses can be processed through payroll and tax paid in real time. This removes the requirement for individual P11D’s. There is still a requirement for Class 1A NICS however meaning form P11D(b) must be submitted.
If an employer goes down this route, they must inform employees of the change in which their benefits are being reported and how the tax will be collected.
If you need any help with completing your P11D's or have any questions, please get in touch with solutions@apexpb.co.uk
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