If you operate your business as a limited company or you employ people, you’re legally required to provide HMRC with full details of benefits received and expense payments made by you (and any employees if you have them) during the previous tax year by submitting a form P11D.
The deadline for filing P11Ds for the tax year 2020-21 is just days away. You only have until 6th July 2021 to submit your form electronically.
By this date, you must also provide any employees with copies of their P11D and complete form P11D(b) to advise HMRC how much Class 1A National Insurance you owe.
Make sure you report all benefits…
Where an employee’s remuneration includes things other than salary – such as private medical cover, company cars, or subsidised gym membership, HMRC is likely to consider these to be benefits in kind and liable to be taxed.
But some other benefits in kind may not be so obvious. Examples that can sometimes catch out employers but must be reported when P11Ds are completed. include:
- Directors loans
Where a director has temporarily borrowed money from their company and has an overdrawn director’s loan account.
- Use of a company vehicle
Where the director or an employee has private use of a company vehicle – for example, they use it to travel from home to site and back rather than parking it up overnight at the business premises.
- Use of a company asset
Where a business makes a company asset available for use to a director or employee. Used in this context, the term ‘asset’ is very broad and might, for example, encompass the use of a holiday home or season tickets to a sporting venue.
Paying any tax due
Employees: Once HMRC has updated an employee’s tax code, any tax they owe will be collected either through PAYE or through the self-assessment system if the individual completes an annual tax return.
Employers: The employer will be responsible for settling any Class 1A National Insurance Contributions due on benefits they’ve given to employees. The deadline for settling any tax owing to HMRC is 19th July if payment is made by post or 22nd July if payment is made electronically.
Taking the burden out of reporting benefits & expenses
Preparing and filing P11Ds can be an administrative burden. For companies offering benefits to employees, there’s no way to avoid the responsibility of reporting, but there are easier ways to manage it:
More and more businesses are opting to use HMRC’s online payrolling service to show they’re collecting tax on benefits and expenses through their payroll. Selecting this route relieves employers of the need to submit P11Ds and means any tax employees owe is spread over the tax year. If you want to register for the payrolling service, you’ll need to do so before the start of the new tax year.
- PAYE Settlement Agreements
For certain types of benefits, employers can select to report and pay any tax due on behalf of their employees, so they’re not financially disadvantaged. Doing this requires an employer to set up a PAYE Settlement Agreement with HMRC. Benefits reported in this way must be ‘minor, irregular or impracticable’ and, if they qualify, don’t need to be reported on P11Ds.
Completing and filing P11Ds is a time-consuming annual chore. Inca can advise if using payrolling or a PAYE Settlement Agreement is right for you – or take care of all P11D administration for you. If we already look after your payroll, we’ll just charge a small fee for each form we complete on your behalf.