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% (2019/20), 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 2019/20 is 6 July 2020. 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 have been 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!
P11D exemptions for certain business expenses
Prior to April 2016, 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 However, since 2016/17 claims for dispensation are no longer applicable.
The dispensation arrangement has instead been replaced by an exemption for benefits or expenses where the employee would be entitled to tax relief in full for that benefit or expense.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 exemption does not extend to expenses and benefits provided under a salary sacrifice arrangement.
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.
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.
Our updated working arrangement – We remain ‘Open for business’
Our staff have returned to office based working on a rota basis, each attending one day a week, whilst continuing to work from home at other times. They can still be contacted in the usual way either via email or by calling the office number where reception will divert your call to the appropriate staff member.
If you would like more information or if you require our assistance completing any of the above forms please speak to your usual contact at the firm.
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