The P11D process, benefits in kind, and your business

Do you, as an employer, provide staff with benefits in kind?

If so, you must submit P11D forms to HMRC, advising them this is the case. You must also pay employers’ Class 1A National Insurance contributions (NICs) – and all this needs to be done no later than the 6th of July following the end of the tax year.

The filing of P11Ds can be very time-consuming and complicated. The forms must be completed correctly, and all Class 1A NICs must be calculated accurately. Fail to do so at your peril: HMRC profiles all tax returns submitted – incorrect P11Ds, then, are an easy way to trigger an HMRC Employer Compliance Review.

So, how do begin to ensure you’re doing all this correctly? First, you have to know what a benefit in kind is.

What defines a benefit in kind?

Sometimes called fringe benefits, a benefit in kind is something that can be classed as an asset or a service which you tend to use to reward staff or directors. It isn’t cash, but it has monetary value.

The most common benefits in kind are:

• Company cars and fuel
• Company vans
• Medical benefit, this includes medical insurance (such as BUPA) and dental insurance
• Beneficial loans provided to employees and directors (very detailed and complex calculations)
• Living accommodation
• Travel expenses

If a benefit is taxable, then it is not essential for carrying out a job. If there is private use of an asset, such as a company car, even if the car is used for business purposes, a taxable benefit is reportable to HMRC.

There are specific exceptions to benefits in kind that have been listed by HMRC, which include mobile phones used for business and personal calls as well as trivial gifts (for example, vouchers of £50 or less). All of these exceptions need to meet certain criteria, so double-check everything to ensure you report all that has to be reported. You also need to remain vigilant: something that was once exempt can be taxable the following year.

P11Ds in action

So how much detail do you need for a P11D form? The answer is often quite a lot.

Let’s look at company cars as an example. These will require the list price (not the price that you paid), the CO2 and CC of the vehicle, as well as the cost of any accessories that may have been fitted.

Knowing all the facts about a company car is crucial when calculating the benefit. If your calculation is wrong, it will mean that the employee is underpaying tax and your business is underpaying Class 1 NICs. Employees will not appreciate getting an underpayment notice because you wrongly calculated their car benefit.

Please remember that fully electric cars are now classed as a benefit in kind – they were once exempt from being taxed. As we said before, you need to stay vigilant when it comes to HMRC’s exemptions.

We’re here to help

Don’t be intimidated by this minefield. We help businesses across the UK, so they don’t have to worry about P11D forms. Instead, they can add benefits, make their workplaces attractive to potential recruits, and concentrate on winning work.

We assist businesses in two ways.

First, our experts are on hand to advise companies as well as answer any questions they have. This means anyone who already has a P11D procedure in place can simply fine-tune what they are doing, safe in the knowledge they are being compliant.

Second, we can also take the burden away completely as part of our comprehensive payroll services.

From information supplied by clients, we complete the P11Ds and upload all finished forms to ePaysafe (our secure portal). This can then be accessed by our clients so they can give final approval. Once we’re given the go-ahead, we send the completed P11Ds and the employer’s declaration to HMRC. We are then in a position to advise you of payable Class 1A NICs.

Furthermore, we also upload the employees’ copies of the P11D forms to their individual ePayslips accounts.

It's a complete service from start to finish.

Don’t get stressed about HMRC deadlines

By using our P11D services, subject to information being provided in a timely manner, we can guarantee that the forms will be submitted to HMRC within the deadlines, thereby avoiding any penalties (late returns incur a penalty of £100 per 50 employees for every month that the forms are late).

Our dedicated team, headed by myself (Paul Chappell), Head of Legislation and Compliance, is on hand to discuss how we can help you with this complex matter.