P11D: A guide to reporting taxable benefits and expenses
Employers have a legal obligation to report taxable benefits and expenses provided to their employees to HMRC each year using forms P11D and P11D(b). These forms enable HMRC to calculate the correct income tax and National Insurance Contributions (NICs) on these benefits.
Understanding the benefits and expenses which must be reported on the forms is essential for employers to comply with tax regulations and avoid any issues in the event of a PAYE inspection from HMRC.
Purpose of the P11D form
If an employer provides non-cash benefits to employees then the cash equivalent value of the benefit is subject to income tax (payable by the employee) and Class 1A NIC (payable by the employer at 14.53% for the 2022/23 tax year, 13.8% for the current tax year). The P11D and P11D(b) forms acts as a declaration by employers, providing details of these benefits, expenses, and facilities provided to employees. HMRC can then collect the NIC due and ensure the employees have paid the correct amount of tax.
Employers are responsible for completing and submitting P11D forms to HMRC for each employee who received taxable benefits or expenses during the tax year, and also the P11D(b) which summarises the total value of the benefits and the NIC due. The deadline for submitting P11Ds typically falls on 6 July, following the end of the tax year on 5 April. If the forms are not submitted by this deadline penalties will be charged, and these are calculated based on the number of forms P11Ds outstanding and the number of months they are late.
The deadline for submitting the 2022-23 forms P11D and P11D(b) is 6 July 2023. The Class 1A NIC must be paid by 19 July, or 22 July if paid electronically.
Taxable benefits encompass a wide range of potential non-cash offerings by employers to employees, including company cars, vans, private medical insurance, low-interest loans, accommodation, and certain employee expenses.
The P11D form requires employers to report the cash equivalent of these benefits, which are subject to income tax and Class 1A NICs. However, it's important to note that certain benefits are exempt from taxation, such as mobile phones, work-related training, and specific job-related expenses incurred by employees.
Calculating taxable benefits
Determining the cash equivalent of taxable benefits can be complex. For example, company car benefits are calculated based on factors like the car's list price, CO2 emissions, and fuel type. If an employer provides fuel for a company car available for personal use, a separate fuel benefit is calculated. If an employee makes any contributions to offset the costs incurred by the employer then these also need to be factored in to calculating benefits.
There is an option for employers to collect tax on certain benefits via the payroll, for example private medical insurance and car benefits. This involves the monthly value of the benefit being added to the employees taxable income, so the income tax is collected in real time. If an employer wishes to do this they must notify HMRC before the beginning of the tax year in which they wish to start payrolling the benefits. A P11D(b) does still need to be filed each year, as well as P11Ds for any benefits not payrolled. The employer is then required to pay the NIC due by 22 July as usual.
Accurate record-keeping is crucial when completing the P11D form. Employers must maintain comprehensive records of all benefits and expenses provided to employees throughout the tax year. Failing to submit accurate and timely P11D forms can lead to penalties from HMRC. It is therefore essential for employers to keep meticulous records and ensure the information reported on the P11D form is complete and accurate. Organised records enable employers to substantiate reported figures easily and respond to any queries or investigations from HMRC. If errors are picked up by HMRC in the course of an investigation, penalties could be significant.
Directors, like other employees, must adhere to P11D reporting requirements. It is likely, due to the nature of the director’s relationship with the company that there are additional benefits or expenses to report.
Directors should carefully review personal expenses and benefits provided by the company and accurately report them on the P11D form. This includes any payments made on behalf of the director, such as personal bills or other personal expenditures. If the director has a overdrawn loan account with the company, and this is either interest free or at a low interest rate, then this may also need to be reported on the P11D.
Employers can streamline the P11D reporting process by using dedicated software or online systems. These tools automate calculations, generate accurate forms, and simplify the submission process. It is advisable for employers to explore HMRC-approved software options to ensure compliance with regulations and facilitate efficient reporting.
If you have any questions regarding P11D forms to minimise the risk of non-compliance, please get in touch.
If you have any questions about the above, or would like more information specific to your circumstances, please enter your email address below and we will get in touch: