Do you get the sinking feeling that you need to go through your accounts for the previous tax year and work out what expenses & benefits you have paid/given your staff or yourself? You heart sinks and you wish you’d sorted out that dispensation during the year as you were recommended. Woo hoo – it is only for staff that get paid over £8,500 so you are in the clear. Well, not just yet.
The £8,500 is for their salary/wages plus the value of benefits. BUT – all directors need to complete one even if they are below the threshold. BooHoo. There is a get out on that one – more below.
There is a deadline of course – 6th July is when they have to be in to HMRC for each person they are needed for. If they are not received by the 19th July, then a penalty will be incurred. These are £100 per 50 employees for each month or part month that the return is outstanding. So if it is just yourself and one other, that’s still £100 per month.
Once the P11D has been received, the employee will have their tax code changed for these amounts, and of course you as an employer will need to pay class 1A national insurance on the benefits given by the 22nd July (19th July if by cheque). Makes you wonder if it’s worth giving staff benefits.
So what is a P11D?
A P11D is a statutory form required by HMRC from all UK based employers, and directors of companies, detailing the value of expenses paid to employees and themselves and the cash equivalent of certain benefits during the tax year.
As mentioned above, for employees, they have to earn over £8,500 including benefits to be caught by the P11D process. For those who have benefits & salary of less than £8,500, then there is a form P9D. All directors if they receive benefits & expenses must complete a P11D no matter what their salary is.
Common Examples of reportable items:
- Employment benefits such as health insurance, dental insurance, gym membership
- Car & fuel benefits
- Reimbursed expenses
- Business entertainment expenses
- Directors beneficial loan
What do I include?
The heading information for each person is bulk standard:
- Employers name & reference number
- Employees name
- Employers national insurance number
- Employees date of birth and gender
- The tick box if a director
From your accounting records, you should be able to complete the rest of the information. Some of it can come from service providers such as your health care provider can give you a statement for benefit for the tax year; a car leasing company (if that is how you finance a car) can give the list price and things like the engine size & CO2 emissions.
The 2014/15 form can be found here: http://bit.ly/P11D-2015
You mentioned Class 1A National Insurance. What do I do there?
There is something called a P11D(b). This is a summary of all your P11Ds that you have completed and with a bit of jiggling with it, you get to see how much national insurance you have to pay on these benefits. The P11D(b) only applies if you have more than one P11D to submit.
The basic process for the P11D(B) is:
- Enter the total value of expenses & benefits provided for the year
- Adjust the total for all those expenses & benefits that do not attract a Class 1A payment
- Calculate the 1A amount
- And complete the declaration at http://bit.ly/P11D-b-2015
I can hear you – “but I don’t know what is removable and what remains”. There is a useful guide to what attracts a class 1A charge. This can be found here: http://bit.ly/P11D-2015-Guide, but if you look at the P11D form you are completing, it has a gold 1A at the side of it which indicates that you need to pay NI on these items.
The price you have to pay on benefits that are deemed class 1A’able is 13.8%
The directors get-out
If you are a director or a company, have not received benefits & expenses, and have not previously had to complete a P11D, then you do not need to submit a Nill return.
If you are a director that has done a P11D before but now has a dispensation, then assuming all your expenses and benefits are covered by the dispensation, then you don’t need to complete a P11D.
Some payroll systems have a year end filing report and you can tick the box for no P11D’s but some software doesn’t. Ask your payroll provider if you have one.
I always get professionals to do payroll as there are so many little slip ups that will cost me money. It may seem expensive, but I’d rather have the right boxes ticked and submitted on time, than make a hash of it and have the HMRC wrath on me. If you are late by 1 day, you can get a £100 fine, 4 months late is £400. Seems daft if you can avoid it.
You may also consider getting a dispensation for the expenses site o f the P11D although that is all changing from 5th April 2016.
For more information on Expenses and Benefits, please go to >>>this page<<<.
Always talk to your accountant before acting on any advice. If you’d like to talk to us about your accounting requirements, please complete the contact form http://performanceaccountancy.co.uk/contact-us/ and we’ll get in touch.