What is a P11D?
A P11D is the form used to report expenses and benefits paid to directors and employees which have not been subject to PAYE tax. HMRC require your company to notify these expenses for each director or employee after 5th April each year. There are penalties based on a percentage of lost revenue dependent on taxpayer behaviour.
What is a P11D (b)?
A P11D (b) is the form that is sent in to HMRC with the P11D showing the amount of any additional tax or Class 1A National Insurance due on the expenses and benefits. If there are no benefits or additional tax to report then you need to send in a “nil” return to avoid penalties for failure to submit the return.
Changes to the P11D regime from April 2016
From April 2016, you no longer have to report routine reimbursed employee expenses on the Plld form as there is now a statutory exemption in place to cover such expenses.
What type of expenses should go on a P11D?
You are no longer required to report the following expenses on the form:
- Business travel
- Phone bills
- Business entertainment expenses
- Uniform and tools for work
To qualify for an exemption, your company must be reimbursing your actual expenses costs incurred.
What type of expenses are still required to be reported on a P11D?
Essentially taxable expenses and the cash equivalent of company assets provided for the private use of the director will still need to be reported on the form. Both are referred to as benefits in kind.
What are Taxable Expenses?
They are expenses which the business incurs directly but have a personal benefit to you. For example, this could be if the business has paid for expenses from which you derive personal enjoyment such as gym membership. More information on expenses can be found via the Knowledge Centre on Brookson Connect.
These expenses will show in your company bank account but, unless you have claimed them on the expenses form and submitted receipts to us, we may not know what they are and so they will not appear on your P11D. If you believe there are any of these, please call us to discuss.
What are Benefits in Kind?
As noted above, where the company incurs costs or provides assets for the private use of the director these normally result in a Benefit in Kind charge. In respect of taxable expenses, the amount to report on the Plld form is equal to the amount of the expense. Where an asset is provided for private use, the amount to report on the form is the cash equivalent value –how this is calculated is dependent on the asset in use. Both are referred to as benefits in kind.
By reporting these amounts on the Plld, this means additional tax is payable personally and potential Class 1A National Insurance is payable by the company Generally, Benefits in Kind fall into several categories and depending on the type of benefit there may be a Class 1A National Insurance Charge.
The following are examples of taxable benefits and expenses which you should tell us about:
- Assets paid for by the company and transferred to you at no cost or below market value e.g. Personal items paid for using company cheques or credit cards and money not refunded to company;
- Payments made on your behalf e.g. paying personal bills from company account or with a company credit card;
- Vouchers (in the case of child care vouchers any excess over £55) or credit cards e.g. using company credit cards to fund personal expenditure;
- Living accommodation – the cash value of the living accommodation is regarded as a benefit;
- Mileage Allowance – amounts in excess of the HMRC approved rates;
- Cars, vans and/or fuel provided by the company and available for private use (in the case of vans incidental private use can be ignored);
- Low or interest free loans, often referred to as director’s loans;
- Private medical or dental insurance paid for from the company account;
- Assets placed at your disposal, eg motorcycles, holiday homes;
- Professional fees, subscriptions - some subscriptions to professional bodies may be exempt;
- Training – only work related training is allowable and only if paid for or reimbursed by the company;
- Telephones, mobile phones and Blackberrys unless the contracts are in the company’s name.
Does having a P11D mean I have additional tax to pay?
Going forward, from 2016/17, generally yes.
This is because we are no longer required to report all your business reimbursable expenses on the form, because of the statutory exemption now in place.
However, there is still a requirement to report your benefits in kind on the form and record these benefits of employment on your self-assessment return, therefore there will be additional tax to pay in this respect.
The Brookson expenses system checks expenses as they are claimed. If we believe that additional tax may become due relating to a particular expense, you are contacted by a member of the Brookson team to discuss whether or not you still wish to claim the expense through the company before we process the request.
Therefore, your claim forms which have been processed through the system represent expenses which we believe are wholly, necessarily and exclusively for the purposes of your trade and so can be paid to you tax free.
What if I only have reimbursable business expenses and no benefits in kind?
From April 2016, you will not require a copy of a Plld form as there are no benefits in kind to report.
The company, however, is still obliged to confirm to HMRC that there are no benefits in kind to report and no Class 1A National Insurance to pay as part of the Plld process.
Will Brookson submit my P11D and P11D (b)?
Once you are satisfied that the information on the P11D is correct, Brookson, as your tax agents, will submit these forms on your behalf in time for the annual 6th July deadline.
What happens if I do not complete a P11D?
Completing a P11D for a director and employees who are in receipt of company benefits or expenses is a necessity and there are serious consequences for failing to comply including penalties based on a percentage of lost revenue.
What happens if my P11D is incorrect?
Brookson makes every effort to ensure that the details on the P11D are correct based on the knowledge we have of the expenses you have claimed from your company. However, you should be aware that there can be penalties for incorrect P11Ds.
To avoid such penalties, it is important that you advise us of any expenses or benefits we may not be aware of. For example, expenses which you have paid directly from the company without submitting a claim form that you believe should be reported. Remember it is ultimately your responsibility to provide accurate information to HMRC.
What are “allowable” expenses?
Allowable expenses are the costs incurred for the sole purpose of making profits for your business.
For expenses paid by the company to be allowable they must satisfy HMRC criteria that they are wholly and exclusively for the purpose of the trade. Similarly, expenses paid by you are only allowable if they are incurred wholly, necessarily and exclusively in the performance of the duties of your office or employment.
Allowable expenses are no longer required to be shown on your P11D form –but you do need to claim your expenses on an expense claim form for these amounts to be relieved against your company profits.
How do I ensure I get tax relief on my allowable expenses?
From April 2016, there is no longer a requirement to report your business reimbursable expenses on the plld form – therefore the relief is automatic and there is no requirement to sign and submit the corresponding ‘Section 336’ letter as required in previous years.
How would I know if any of the expenses I have claimed during the year are Benefits in Kind?
The Brookson expense claim system reviews all the claim forms which are submitted individually. Any which might give rise to a Benefit in Kind are followed up with a phone call to you before processing.
This call will explain the full tax implications of claiming the cost. You will be given the opportunity to decide whether to go ahead and make the claim or not.
Therefore, if there are any Benefits in Kind generated, which relate to an expense on a Brookson Expense Claim Form, you will be contacted at the time and will be aware of any liability well in advance.
How are Benefits in Kind taxed?
The value of any benefits must be reported annually by means of a P11D.
Any taxable benefits will also be reflected in your PAYE tax code to ensure that tax is collected throughout the year rather than ending up with tax underpaid at the end of the year.
What is Class 1A National Insurance?
Certain benefits attract additional National Insurance contributions; this is known as Class 1A NIC. It is an employer liability which is a cost to your company but does not count towards your contributions for state benefits. For 2015/16 it is calculated at 13.8% of the total value of any benefits liable to Class1A.
When do I have to pay this by?
The Class 1A NIC is payable to HMRC by 19th July 2016 (in the case of 15/16).
How can I pay the Class 1A National Insurance?
As an employer you will be issued with a separate special payslip for paying the Class1A due or it can be paid via an approved electronic method. Please refer to HMRC website.
Where can I find further information on expenses and benefits?
Our Expense Guidelines highlight the types of expenses which can be claimed tax free from your business.
Detailed HMRC guidance on all of the above can be found via HMRC website or alternatively in the HMRC booklet ‘480(2008) Expenses and Benefits - A Tax Guide’.