Employers provide a remuneration package that can include benefits in kind, in addition to weekly or monthly salaries. Salary (money) is taxed through the PAYE Real Time Information system. This is a very efficient system for accounting for all employees earnings.
However what about other parts of a remuneration package?
These may include company cars and fuel, vans, medical benefit, gym membership etc. The list is virtually limitless given that an employer can pay any bill or expense on behalf of an employee. Such elements of a remuneration package are still taxable, but this is where the P11D comes into play.
Benefits in Kind are declared to HMRC on form P11D, the tax is collected from the employee through the employees’ tax code or through Self-Assessment.
However, there is also a charge on the employer to National Insurance Contributions (NIC), Class 1A NIC. NIC is only payable by the employer at 13.8%, there is no employees NIC payable. The employers declaration form P11D(b) notifies HMRC of the amount of Class 1A NIC due.
What benefits are not reported on P11D?
There are certain expenses and benefits that are exempt from tax either because the government want to promote the use of a certain benefit, or because there is deemed to be no or little tax consequences to their use. These include;
Cycle to work schemes, as long as the scheme is open to all employees
Childcare up to £55 per week and already in place at 4 October 2018
Mobile telephones where the contract is between the employer and the telephone company
Are P11D’s required?
Yes, if employees and directors have been provided with a non-cash benefit in kind such as those listed above. However the issue becomes clouded when considering the payment of expenses.
HMRC have a rather catchy statement for assessing whether expenses are taxable or not. If expenses are incurred, ‘wholly, exclusively and necessarily in the performance of the employees duties’, they are not taxable and do not need to be reported on P11D. These are expenses covered by an exemption.
Exemptions have replaced dispensations. If the employer is either paying a flat rate expense in line with HMRC’s benchmark rates or reimbursing the employees actual costs, employer don’t need to report the expenses on form P11D.
However expenses that have a duality of purpose with part being for business and part private, must be reported on form P11D. A claim can then be made to HMRC seeking relief in respect of the business related expenses.
Similarly expenses reimbursed without documentary evidence of the expense must be reported on P11D.
Are there time limits?
Yes there are deadlines and time limits you need to be aware of.
- P11D’s and the employer declaration form P11D(b) must reach HMRC no later than 6 July, following the end of the tax year.
- The Class 1A NIC, payable by the employer on the value of the benefits in kind must reach HMRC no later than 22 July if paid electronically, or 19 July if paid by cheque.
HMRC will charge penalties for the late submission of the forms, £100 per 50 employees per month or part month. For example if there is only 1 P11D submitted to HMRC on 7 July, a penalty of £100 will be charged.
