Do you operate your business as a limited company or have employees? If so, you only have a few weeks to report any taxable expenses or benefits you’ve received or provided to your employees during the last tax year.
You can pay employee expenses and benefits through your payroll, report them online and settle any tax due throughout the year. However, most small businesses choose to report to HMRC at the end of the tax year, completing a form P11D for each director or employee they’ve provided with taxable expenses or benefits.
The deadline for filing forms P11D with HMRC for the tax year 2022-23 is 6th July 2023.
By this date, you must also:
- Provide each director and employee with a copy of the P11D you’ve supplied to HMRC.
- Complete a form P11D(b) advising HMRC how much Class 1A National Insurance you owe in relation to employee expenses and benefits.
You don’t have to complete forms P11D if there are no taxable expenses, payments, or benefits to be reported or if the expenses and benefits have already been taxed through your payroll.
Don’t wait for HMRC to contact you: it’s your responsibility to know whether or not you need to complete P11Ds.
You may incur substantial penalties if you don’t file your P11D and P11D(b) returns by the deadline or submit incorrect returns (carelessly or deliberately). Failure to file P11D forms on time carries a maximum penalty of £300, while failing to file form P11D (b) on time will incur a penalty based on the number of employees and how much Class 1A National Insurance is due.
Paying any tax due
As mentioned earlier, employees will have any tax they owe collected by HMRC through either PAYE or the self-assessment system if they complete an annual tax return.
Employers are responsible for settling any Class 1A National Insurance Contributions due on benefits they’ve given to employees. If these are not paid on an ongoing basis through payroll, the deadline for settling any tax owing to HMRC is 19th July if you’re paying by post or 22nd July if you’re making payment electronically.
Make sure you report ALL benefits
Where an employee’s remuneration includes things other than salary, HMRC is likely to consider these as benefits in kind and liable to be taxed accordingly. Each type of expense or benefit is treated differently for tax purposes – check how much you’re liable to pay.
You must report all expenses and benefits. While some benefits – such as private medical cover, exclusive use of a company car or subsidised gym membership may be obvious, some are more easily overlooked. Examples of benefits in kind 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.
- Partial use of a company vehicle: Where the director or an employee has private use of a company vehicle some of the time – 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. 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.
- Use of company money to pay personal accounting fees: Where a director uses company funds to settle their private accounting fees, e.g. completing and filing their Self Assessment tax return, this constitutes a benefit in kind and must be reported as such.
Reporting expenses & benefits needn’t be a chore
Preparing and filing P11Ds can be time-consuming, but there are solutions that can eliminate the administrative burden.
- Payrolling: Using HMRC’s online payrolling service, you can show you’re collecting tax on expenses and benefits through your payroll. You won’t have to submit P11Ds, and your employees will benefit because any tax they owe will be 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. For more information.
- PAYE Settlement Agreements: As an employer, you can select to report and pay any tax due on certain types of benefits on behalf of your employees. You’ll need to set up a PAYE Settlement Agreement with HMRC. Benefits reported this way must be ‘minor, irregular or impracticable’ and, if they qualify, don’t need to be reported on P11Ds. For more information.
Inca can advise if your business needs to complete P11Ds; if it does, we can take care of all administration for you. If we already look after your payroll, we’ll only charge a small fee for each form we complete on your behalf. We can also help you to decide if payrolling or a PAYE Settlement Agreement may be appropriate.