Form P11D and Form 42 – Deadline
and Recent Changes
Forms P11D and P11D(b)
As you will be aware, the above HMRC forms are used to report benefits and expenses provided to employees and directors each tax year.
An employer is liable for Class 1A National Insurance Contributions on taxable benefits, at 13.8% (2017/18), as reported on the employers declaration form P11D(b).
Form P11D Deadline
The deadline for submitting forms P11D (and providing a copy to employees) and also form P11D(b) for 2017/18 is 6 July 2018. Failure to submit the forms by this date will potentially lead to a penalty.
Previously, HMRC would know whether to expect a P11D(b) from the year end PAYE forms under RTI, however reference to the P11D(b) was removed from the RTI submission a few years ago. A reminder will be sent through the post to employers where HM Revenue & Customs expect a P11D(b) to be filed. If the completed form is not filed then a late filing penalty will be issued.
Any penalty for the late submission of form P11D(b) is charged with reference to the number of P11D’s due for the year – £100 per every 50 employees (or part of 50) per month or part month until the form is submitted.
In addition to late filing penalties, it is more important to be aware that penalties for completing an incorrect form P11D can be up to £3,000 per form, so it is essential they are right!
In previous years, an application could be made to HMRC for a dispensation from the requirement to include tax-allowable business expenses paid or reimbursed by an employer on the employee’s P11D, thus saving time on completion of some P11Ds. However, since 2016/17 claims for dispensation are no longer applicable.
The dispensation arrangement has instead been replaced by an exemption for benefits or expenses where the employee would be entitled to tax relief in full for that benefit or expense. In these instances there is no requirement for the employer to report the benefit or expense on the employee’s P11D. Many of the expenses and benefits covered by previous dispensations will also be covered under this exemption, however, the new rules place the responsibility on determining if the exemption applies firmly on the employer.
Employers need to ensure appropriate expense claims are adequately checked by the employer, and records are being kept supporting these claims. Expense claims policies and procedures may need to be reviewed, and it maybe that going forward consideration should be given to applying to use bespoke rates for such expenses.
It should also be noted that the new exemption does not extend to expenses and benefits provided under a salary sacrifice arrangement.
A new exemption for trivial benefits came into force last year. Broadly benefits which do not exceed £50 are exempt provided the following further conditions are also satisfied:
- It is not cash or a cash voucher.
- It is not provided as part of a salary sacrifice arrangement or other contractual obligation.
- It is not in recognition of services provided, or to be provided, by the employee in the course of their employment.
Trivial benefits are capped at £300 for the tax year where provided to directors, other officers or members of their family, of a close company.
Benefits provided under a salary sacrifice scheme or provided instead of earnings
From the 6 April 2017 the benefits of many salary sacrifice arrangements have been removed with the exception of the following:
- Employer pension contributions (including employer provided pension advice);
- Cycle to work schemes;
- Ultra-low emission vehicles, those with emissions below 75g CO2 per km.
Now the benefit to be entered on the P11D will be based on the higher of the salary sacrificed or the cash equivalent of the benefit.
Employees with contracts for salary sacrifice arrangements which were already in place before 6 April 2017 have been granted additional time before the benefits are removed. Such schemes will not be subject to the new rules until 6 April 2018, or the date the existing contract is changed, renewed or ends if earlier. Therefore it will be important to identify when the arrangements came into force.
Note that arrangements for cars with CO2 emissions above 75g/km, school fees, or living accommodation, that were in place pre 6 April 2017 will not be subject to the new rules until 6 April 2021, provided that the arrangement is not altered or renewed before then.
Employment Related Securities and share scheme returns
The 6 July 2018 deadline also applies to the submission of annual returns for employment related share scheme members (previously known as form 42) and notifying HMRC of certain share acquisitions for the year to 5 April 2018.
The online forms must be completed in respect of almost ALL SHARE ACQUISITIONS IN ANY CIRCUMSTANCES by a director or employee. Failure to submit a form and failure to do so can lead to an initial penalty of £100, rising to £400 after 3 months, £700 after 6 months and daily penalties after 9 months. It is therefore important that the forms are completed for each tax year but they can easily be overlooked.
A form may be required in the following circumstances: the incorporation of a business, the gift (or other acquisition) of shares to/by an employee, a new issue of shares or a share for share exchange. Broadly the only exceptions are the transfer of initial subscriber shares when a new company is incorporated or if the transfer is in the course of a normal family or personal relationship. In addition, nil returns can be required if forms have been filed in the past.
If you would like more information or if you require our assistance completing any of the above forms please contact our Tax Director, Jenny Marks.
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