P11D Expenses & Benefits
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. Where no benefits have been paid during the tax year – employers submit a ‘nil’ return
WHAT TYPE OF EXPENSES ARE REQUIRED TO BE REPORTED ON A P11D?
Principally taxable expenses and the cash equivalent of company assets provided for the ‘private use’ to Director / Employees need to be recorded on the form. These type of expenses 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.
Archers Accountants may not be aware the company has incurred expenses with personal benefit particularly where you have paid the expense and claimed it back from the company, so they will not appear on your P11D. If you believe there are any of these, please let us to know.
WHAT ARE BENEFITS IN KIND?
Where the company incurs costs or provides assets for the private use of the director these normally result in a Benefit in Kind charge. 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.
By reporting these amounts on the P11d, this means additional tax is payable personally and potential Class 1A National Insurance is payable by the company. 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 by the company 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 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, e.g. 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 and mobile phones – unless the contracts are in the company’s name.
DOES HAVING A P11D MEAN I HAVE ADDITIONAL TAX TO PAY?
There is a requirement to report your benefits in kind on form P11D and record these benefits of employment on your self-assessment return, there will be additional tax to pay in this respect.
If you believe that additional tax maybe due relating to a particular expense, please discuss with Archers Accountants whether or not you still wish to claim the expense through the company.
WHAT HAPPENS IF I DO NOT COMPLETE A P11D?
Completing a P11D for a director and employees whom are in receipt of company benefits or expenses is a requirement and there are serious consequences for failing to comply including penalties based on a percentage of revenue.
WHAT HAPPENS IF MY P11D IS INCORRECT?
Archers Accountants takes reasonable takes stepst 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. 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.
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. The current applicable rate 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
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.
Detailed HMRC guidance on all of the above can be found via HMRC website or alternatively in the HMRC booklet ‘480(2018) Expenses and Benefits – A Tax Guide’.