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P11D: Do you know your duties?

What is a P11D?

If you run a business, you may provide benefits or non-exempt expenses to some or all your employees.

Most taxable employee benefits can be deducted through payroll – providing the employer has registered with HMRC prior to the start of the tax year. Otherwise, the employer must submit a P11D form.

A P11D form notifies HMRC about any taxable benefits and non-exempt expenses that staff have received in the previous 12 months.

The sort of expenses or benefits that you might need to report include company cars, health insurance, non-business travel and entertainment expenses and childcare. A full list of taxable benefits can be found here, on the HMRC website.

Irrespective of whether you provide benefits via payroll or not, you must still complete a P11D(b). The P11D(b) enables HMRC to calculate how much the employer owes in class 1A National Insurance contributions (NICs). They can also calculate how much PAYE the employee should pay on the benefit.

Are there any exemptions?

It’s important to remember that there are exemptions for some business-related expenses. These include business travel, phone bills, business entertainment expenses, plus uniform and tools required for work. The exceptions are only applicable if you either reimburse the employee’s actual costs or you have agreed with HMRC a flat rate to pay the employee as part of their earnings.

Another of the exemptions applies where you are paying HMRC’s benchmark rates for expenses such as fuel.

Expect penalties for late P11Ds

It pays to ensure that your forms are filled out correctly as errors can be difficult to rectify. Incorrect submissions or late filing can result in financial penalties. As a result, you may end up paying more tax than you owe.

You will be liable to pay £100 per 50 employees for each month or part month your P11D or P11D(b) forms are late. Penalties and interest are also payable if employers are late paying HMRC.

P11D deadline

You must file P11Ds by 6 July, following the end of the tax year. So, for example, you should file a P11D form for the tax year 2017/18 by 6 July 2018. You should pay any tax due by the 22 July (19th July if paying by cheque).

In addition to submitting the P11D form to HMRC, you must also give employees a copy of the information that appears on the forms by 6 July.

Common P11D mistakes

Company cars – ensure the start date/end date accurately reflects when an employee received or returned a company car. If the employee had the car prior to the start of the new tax year, the ‘from’ box must be left blank. Likewise, if they still had the car after the start of the new tax year, the ‘to’ box should be left blank.

Home phone usage – keep a note of all business calls, including those made on home phones or personal mobile phones. Employers frequently forget about these when completing a P11D.

Mileage – mileage payments reimbursed to employees using their own cars in excess of HMRC’s Approved Mileage Allowance Payments (AMAP) rates – currently 45p for the first 10,000 miles and 25p thereafter – are fully reportable on forms P11D. Errors often creep in where business mileage in an employee’s own car exceeds 10,000 miles in the tax year.

Entertaining – many employers incorrectly report entertaining expenses when submitting a P11D.

P11D duplications – you should avoid submitting duplicate information on paper where it has already been filed online.

Sign before submission – if you are submitting a paper P11D(b), you must remember to sign the form!

Don’t make filing your P11D difficult – keep on top of your records and accounts to ensure that filing your P11D is as painless as possible.

For professional advice on this and other tax and accountancy-related matters, please contact us.

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