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Now that the last tax year has ended (6th April 2019 to 5th April 2020), there are certain forms that UK employers will need to consider in order to box the year off and commence with the 2020/21 tax year. One of the most important is the P11D form, and the deadline is fast approaching.
What is a P11D form?
A P11D is a form sent to HMRC by UK employers. The form is used to outline the cash value of benefits given to employees or taxable expenses which are not wholly and exclusively for business purposes. It is up to the employer to analyse all benefits and expenses given to its employees and report the figures to HMRC.
What are the P11D expenses and benefits?
These are expenses and benefits that companies provide to employees which the employees are liable to pay tax on. A P11D needs to be submitted every tax year for each employee.
Below are some examples of expenses/benefits which may need to be reported on a P11D form:
- Private medical insurance schemes
- Living accommodation
- Assets transferred
- Miscellaneous costs, like taxis, childcare etc
- Low/interest-free loans (also known as ‘director’s loans’)
- Credit card expense payments
- Non-credit card expense payments
- Cars, vans and/or fuel provided by the company for private use (where vans are provided, incidental private use is allowed)
- Mobile phones (unless the contract is in company’s name)
- Vouchers (if they are childcare vouchers, it applies for any excess over £55pw
- Professional fees/subscriptions
Some are exempted from the P11D
There are some routine expenses that employers do not have to enter into a P11D. These are:
- Phone bills
- Business travel
- Uniform/tools for work
- Business entertainment expenses
However, for the above to be exempted, employers must pay a flat rate to their employees as part of their earnings. HMRC have a list of allowable flat rate expenses, however, if a company wishes to pay in excess of the flat rate, they will need to agree a benchmark rate or bespoke rate with HMRC.
When is the P11D deadline?
The deadline for submitting P11D forms for the 2019-2020 tax year is 6th July 2020.
What happens if the P11D deadline is missed?
According to the UK government: “You will receive a penalty of up to £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”
There are also penalties incurred from incorrectly submitted P11D forms, so employers need to exercise care and vigilance when going through the process. Penalties are calculated based on a percentage of the potential revenue lost according to the taxpayer and level of culpability (this can actually be up to 100% of the tax owed).
It is vital that employers check and double-check their P11D forms to ensure that everything is accounted for.
Struggling to find time for the administrative side of business?
There are services out there, like those of Manchester-based accountants Alexander & Co, which can help employers complete their P11Ds as well as advice on a range of other tax issues.
Matthew Stambach, Head of Private Client Tax at Alexander & Co explained: “All employers who provide taxable benefits to their directors & employees which are not put through the payroll will need to file an end-of-year report of those benefits to HMRC. The employer is required to prepare a forms P11D for each employee in receipt of a taxable benefit and a form P11D(b) to declare the Class 1A NIC due on the total of those benefits.
“If businesses have not yet prepared these, they should act now as failure to file on time can result in late submission penalties.”
Take note and ensure that your business begins the new tax year in the best way possible.
