Benefits in Kind (P11D): It’s that time of year again

A Benefits in Kind Form (P11D) is used to report expenses and benefits paid to directors and employees, which have not been taxed through the payroll, or PAYE system. As a result, you can pay the tax and National Insurance owing from these. Typical examples include company cars, health insurance, travel and entertainment expenses and childcare. The employer needs to report these to HMRC after the end of each tax year (5th April), where applicable.

To make the administration and cashflow of this simpler, some employer’s choose to payroll these benefits, also known as payrolling. Where these benefits are minor, irregular or impracticable a PAYE Settlement Agreement can be used instead.

Benefits in Kind Examples

Here are just some examples of Benefits in Kind expenses and benefits, which need to be reported to HMRC via a Form P11D:

1. Assets paid for by the company and transferred to a Director at no cost / below market value;
2. Personal payments made on behalf of a Director by the Company;
3. Vouchers (if in excess of allowances) or credit cards paying for personal expenses of employees of Directors;
4. Living accommodation – with the cash value of the living accommodation regarded as a ‘benefit’;
5. Mileage Allowance – if in excess of the HMRC approved rates;
6. Cars, vans and/or fuel provided by the company and available for private use;
7. Low or interest-free loans to employees or Directors;
8. Private medical or dental insurance paid for by the business;
9. Other assets owned by the business that you are given access to, e.g., yacht, motorbike, holiday homes, entertainment (above allowances), season tickets etc;
10. Some professional fees and subscriptions;
11. Training – where not considered to be work-related; and
12. Telephones and mobile phones, if not in employer’s name and not work-related.

Business or Company Cars

One of our most Frequently Asked Questions we get is “Should we put our car through our business, or pay personally”. This isn’t covered here, but please see our recent blog to find out more. Having a car through a business can create a benefit in kind, as noted above, where there is an element of private use.

Form P11D(b)

A Form P11D(b) is used to calculate the Class 1A National Insurance owing from all the expenses and benefits provided. This form is needed when:

• you’ve submitted any P11D forms
• you’ve paid employees’ expenses or benefits through your payroll
• HMRC have asked you to – either by sending you a form or an email

If HMRC have asked you to submit a P11D(b) but there is no Class 1A National Insurance owing, you can notify they of this, using an online declaration.

Exempt Benefits in Kind

You don’t have to report certain business expenses and benefits, which are business-related. For example, business travel and subsistence, work phone bills, business entertainment expenses and uniform and tools for work.

To qualify for an exemption, you must be either be:

• paying a flat rate to your employee as part of their earnings – this must be either a benchmark rate or a special (‘bespoke’) rate approved by HMRC
• paying back the employee’s actual costs

You don’t need to apply for an exemption if you’re paying HMRC’s benchmark rates for allowable expenses, such as mileage allowance or no/low-interest loans.

Benefit in Kind Deadlines

An employer has until 6 July following the end of the tax year to:

• Submit Form P11Ds online to HMRC;
• Give employees a copy of the information on your forms; and
• Tell HMRC the total amount of Class 1A National Insurance owed on form P11D(b).

For example for the tax year ending 5th April 2020, the deadline will be 6 July 2020.

Other deadlines include:

• 22 July (19 July by cheque) to pay any Class 1A National Insurance owed on expenses or benefits; and
• 22 October (19 October by cheque) if you have a PAYE Settlement Agreement, to pay tax and and Class 1B National Insurance.

Making an amendment to your Benefits in Kind

These must be filed using a paper form, even if you submitted the original version online.

Here are a few tips:

• Include all the benefits and expenses for the tax year, not just the ones you want to change;
• On the Form P11D(b), similarly include the total amount of Class 1A National Insurance you need to pay, not the difference from your previous version.
• The forms online are typically from the latest tax year, so write a different tax year on the form, if you need to report a different year.
• Ensure that you write:
  • that you’re using the form to correct an error made in a different year to the one printed on the form; and
  • the tax year you’re making the amendment for.

New or amended forms need to be sent to:

P11D Support Team
BP2302
HM Revenue and Customs
Department 1250
Newcastle-upon-Tyne
NE98 1ZZ

PAYE Settlement Agreements and Payrolling

As mentioned above, some employer’s choose to declare benefits in kind through their payroll each known, also known as payrolling. Where these benefits are minor, irregular or impracticable a PAYE Settlement Agreement can be used instead. More on both of these schemes can be found in our recent blog.

Benefit in Kind Penalties

A penalty of £100 per 50 employees for each month or part month a P11D(b) is late is applied. Interest and penalties are also payable where HMRC are paid late.

Finally, penalties can also be charged if you carelessly or deliberately give inaccurate information in any filing, which results in either the employer:

• Not paying enough tax; and/or
• Over-claiming tax reliefs

Specialist tax advice from Black and White Accounting

This is all in a day’s work for our specialist payroll team. If you have any questions or are unsure about anything in this area, please do not hesitate to contact our specialist tax team at Black and White to help you. Contact Black and White Chartered Certified Accountants today, populate the ‘Got A Question’ form, or call us on 0800 140 4644.