The simple guide to understanding P11D Forms and Benefits in Kind
As accountants the most common question we’re asked by the self-employed, company directors, and employees is ‘What expenses can I claim?’
With the P11D submission deadline fast approaching it’s worth dedicating a blog to P11D forms and to explain the difference between Expenses and Benefits in Kind.
For many taxpayers the rules around what can and can’t or should and shouldn’t be taxed can be a real headache.
That’s where I can help with this simple guide to P11D and taxable expenses.
What is P11D submission?
HMRC’s P11D form captures information on Benefits in Kind. In employee terms – ‘perks’. Benefits in kind effectively increase your salary. That’s why HRMC expects them to be declared.
N.B Any National Insurance on the contributions has to be paid by the company not the employee.
Who has to complete a P11D form?
Company Directors and all employees with taxable expenses or benefits in kind HMRC’s next deadline is 6 of July and covers the 2016/2017 tax year.
When don’t I complete a P11D?
If you have no taxable expenses or benefits to be returned for an individual.
What is a business expense?
The easiest way I find to explain business expenses to a client is: consider a business expense as a cost incurred wholly to do with work. For example business travel or paying for a lunch while away from your usual workplace.
What is a benefit in kind?
This is a monetary or non-monetary reward paid by your company over and above your paid annual salary. This could for example be your company car, a low interest or interest free loan, a gym or golf club membership etc.
HMRC classes such payments out with expenses not wholly associated with your business. The reason being, you can benefit personally as well as for business needs.
It’s worth noting, only certain benefits in kind are taxable. The most obvious being Company Cars. Look out for our next blog helping you to choose between ‘Company Car or Cash?’
What expenses can I claim as a director or employee?
First, ask yourself is this expense wholly and exclusively for business and in the performance of your job? Next think does it fit under any of the following categories:
· Business Travel:
Travel must be 100% for business and to a temporary workplace.
· Accommodation:
Again you can claim if you are expected to stay away overnight or for brief period to attend a temporary workplace. Rental cost of accommodation will be considered if it’s less than the cost of a hotel.
· Subsistence
Don’t forget you can claim food consumed when away travelling for work. Although, it must be considered a “reasonable” expense. No fine dining in a 3 start Michelin Restaurant.
What are the allowable expenses?
Expenses that don’t generally appear on P11D form include Charity Donations and Childcare Vouchers.
A word of caution. In the case of Childcare Vouchers an employer may have to pay the Class 1 NI.
For details on Childcare Voucher Scheme visit HMRC site The site provides a table detailing limits and exemptions depending on tax band and date employee joined the voucher scheme.
How do I pay tax on a benefit in kind?
Two options are available to you. One if your company has opted in to paying tax owed through payroll. If not you can pay through a self-assessment submission or if not in self assessment HMRC will bill you directly and/ or include it in your coding to pay as you go.
When is next P11D submission deadline?
Soon. 6 July 2017 to cover tax year 2016/2017.
What if I miss P11D deadline?
Anyone that reads my blogs regularly knows I hammer home that HMRC will come after you for late submissions.
HMRC can impose a missed submission penalty of £100 for every month (or part month) you’re late for every tranche of 50 employees. So a business with say 5 employees faces the same penalty as one with 49 employees. In fact, interest will be added to late payments of Class 1 National Insurance too.
How to avoid common expenses mistakes?
Another point my co-director Simon Murrison, and I repeat over and over is the simplest way to avoid common mistakes is to keep careful records of all your expenses.
If you are still unsure which expenses are wholly related to your job, considered a taxable expense or a benefit in kind please do get in touch before the next P11D submission deadline.
Finally, I’d like to make you aware that HMRC is keen to replace the process of P11D annual submissions. Instead encouraging employers to submit monthly, through payroll. That way the Government can capture payments steadily every month instead of once a year.
The uptake has been slow. Talk behind closed doors is that employers may withdraw employee benefits as National Insurance costs will rise.
If you work in human resources, payroll, or run a small company call Murrison & Wilson today for a FREE Consultation on 0141 290 0262 or email info@muwca.co.uk
We’ll talk you through the tax implications and advise you on what’s right for your business and your employees.
All the best
Bruce Wilson, Director
Tax Expert