Do all businesses need to complete the forms and which benefits/expenses are reportable?
Not every business will need to prepare forms P11D since they are only required if the employer has provided reportable and/or taxable benefits or expenses to employees during the tax year. However, any business with employees (whether operating as a sole proprietor, partnership, limited company etc.) will need to consider their reporting requirements. The list of taxable benefits and expenses that may need to reported is long but some of the more common benefits include company cars and vans, provision of living accommodation, medical insurance and interest-free (or low interest) loans etc.
Employers should review their records for the tax year carefully to ensure that any benefits or expenses provided to employees are analysed and reported where necessary. There are potentially significant penalties for not filing the forms where they are required, or for completion of incorrect forms.
There is now the option to include the value of certain taxable benefits and expenses through your payroll, rather than including the details on a form P11D. This is known as ‘payrolling’ but you must have registered before the start of the tax year in question to make use of it, so if you haven’t registered already, you will not be able to payroll any benefits for the current tax year ending 5 April 2020. If you payroll all of the benefits and expenses in a particular tax year (having registered before the start of the year) then you shouldn’t need to file a form P11D for the employee(s) in question. Form P11D(b) will however still be required to account for any Class 1A National Insurance payable to HMRC.
Is any tax and National Insurance payable?
An income tax charge will usually arise on the employee based on the value of the taxable benefits included on form P11D. The employer may also have to pay Class 1A National Insurance on certain benefits provided and any Class 1A NI is payable to HMRC by 19 July following the end of the tax year (or 22 July if paid electronically).
Employers should also be mindful that if they settle any personal liabilities owed by employees e.g. personal debts, or make payment for personal bills in the employee’s name e.g. telephone bills, the value of such payments could well be taxable on the employee as earnings and liable to Class 1 (employee and employer) National Insurance.
Are there any exemptions from reporting certain benefits/ expenses?
There are a number of exempt benefits which employers can provide to staff without incurring a tax or National Insurance liability and which do not need to be reported on forms P11D. Again, the list of exempt benefits is lengthy but the more common items include car parking at or near the employee’s place of work, annual parties and functions where the cost does not exceed £150 per head per year, childcare vouchers (up to the exempt amount), contributions to a registered pension scheme and provision of a mobile phone (one per employee).
For the past few years now, there has also been a general exemption from the requirement to report certain business expenses paid or reimbursed by employers to employees and a ‘trivial benefits’ exemption.
The most common items that will be covered by the general exemption include reimbursement or payment of business travel (excluding ordinary commuting), subsistence costs associated with business travel, business entertainment expenses, credit cards used for business expenditure and qualifying fees and subscriptions.
The ‘trivial benefits’ exemption is a statutory exemption from tax for qualifying benefits costing £50 or less. Accordingly, these benefits will no longer be required to be reported on forms P11D. The £50 exemption generally applies on a ‘per gift’ basis (so is not necessarily limited to £50 per employee per tax year) but in order to qualify, the gift cannot be cash or a cash voucher and must not be a reward for work or performance, or included in the terms of the employment contract. Furthermore, any qualifying trivial benefits provided to Directors of close companies and their family members are subject to an annual cap of £300.
We can assist with the completion of forms P11D and advise on your reporting requirements, as well as providing you with a more comprehensive list of the potential benefits and expenses that may need to be included on the forms. Please contact any of our offices if you would like further assistance.
The above is for general guidance only and no action should be taken without obtaining specific advice.