A guide to P11D (and P11D(b)) returns
25 May 2019
This article was featured in the June 2019 issue of the magazine.
Jill Smith MCIPPdip, CIPP policy manager, touches on the basic information to help prepare and guide you before beginning the completion and submission process
Although now comfortably into the new tax year, our attention turns to the fast-approaching deadline of 6 July for the completion and submission of P11D returns to HM Revenue & Customs (HMRC). You either love them or hate P11D returns, and if you were fortunate enough to register prior to 5 April 2018 to payroll benefits, then breathe a sigh of relief as you do not need to complete any P11D returns (unless you did not payroll all your benefits in kind). This article will be useful if you are new to payroll or just want a refresher of what you need to do.
Completing P11D returns can be daunting to most of us, as this is such a complex area. Even if you have software which will process the returns you still need an understanding of the basic principles. There is plenty of help and guidance available, and you will find plenty of guidance and forms to help, including the following:
480 – Expenses and benefits – a tax guide (http://bit.ly/2H7HItt)
490 – Employee travel – tax and NICs guide (http://bit.ly/2JoFHL8) – explains HMRC’s approach in applying the legislation on employee travel
Expenses and benefits A to Z guide (http://bit.ly/2V6kV53) – excellent guide of what to report, pay and technical guidance
Expenses and benefits for employers (http://bit.ly/2VKS5M3) – guidance on reporting, deadlines, record-keeping and dispensations
How to complete forms P11D and P11D(b) (http://bit.ly/2PTaDEe)
Class 1A National Insurance contributions on benefits in kind (http://bit.ly/2VMKw7E).
The P11D is a statutory return required where employers have provided employees or directors with any work-related taxable expenses and taxable benefits in kind, received through the tax year and which have not already been included in wages. To be reported in the P11D are generally any items the company pays for that the employee benefits from such as: company cars and fuel; loans, including for rail season tickets; health insurance; assets provided to an employee that have significant personal use; non-business travel or entertainment expenses.
There are some expenses that can be omitted from reporting by obtaining an exemption from HMRC. Where business expenses are incurred personally by employees, they would no longer need to be reported; examples include business travel, business entertainment expenses, uniform and tools for work, fees and subscriptions.
...P11D returns are filed by the employer by 6 July following the tax year in question
To be eligible for an exemption, the employer must either be paying a flat rate to the employee as part of their earnings (which must be either a benchmark rate or a special ‘bespoke’ rate, approved by HMRC) or reimbursing the employee’s actual costs. An exemption is unnecessary if paying HMRC’s benchmark rates for allowable expenses.
Benefits in kind are declared to HMRC in the P11D return; and the tax due collected from the employee through their tax code or self-assessment. However, there is also a class 1A National Insurance contributions (NICs) charge which is payable by the employer; there is no employee NICs liability. The declaration P11D(b) return is used to notify HMRC of the total value of benefits that an employer has provided to its employees, along with showing the amount of class 1A NICs payable (employer only) calculated at 13.8%. This return must be completed and submitted after the P11D returns.
The deadline for the payment of class 1A NICs must reach HMRC no later than 22 July if paid electronically or 19 July if paid by cheque.
The P11D returns are filed by the employer by 6 July following the tax year in question. So, the returns for the tax year running to 5 April 2019 must be filed by 6 July 2019. A copy of the information entered in the P11D return is to be supplied to the individuals.
P11D information can be sent to HMRC using commercial software or via either HMRC’s PAYE Online or its Online End of Year Expenses and Benefits services. There is also the option to download, complete and submit the P11D (and P11D(b)) return to HMRC’s P11D support team.
For certain benefits it is necessary to include the cash equivalent of the benefit provided. There are six working sheets available on the GOV.UK website that may be useful.
You must calculate the cash equivalent if you have provided benefits for: vans, interest-free and low-interest loans, relocation expenses, mileage allowance payments, living accommodation, and cars and car fuel.
...difficult to rectify, and incorrect or late submissions can result in financial penalties
If, after submitting the P11D returns to HMRC, you realise there were errors or omissions in the data, you must resubmit a revised version of the return which must include all the benefits and expenses for the tax year, not just those being amended. The amendments must be made using a paper P11D return.
For example, if the erroneous P11D return showed a medical benefit of £300 and a car benefit of £2,100, but the medical benefit should be £500, send a revised P11D showing both the medical benefit of £500 and the car benefit of £2,100.
Remember that a change to the P11D values may alter the class 1A NICs amount so you must send a revised P11D(b) return. Include the total amount of class 1A NICs payable, not the difference from the previous version. For example, if the original P11D(b) showed £10,000 in class 1A NICs payable but you forgot £500, the revised return should show the amount as £10,500.
Across the amended return write the word ‘Amendment’ and ensure you include the tax year for which the amendment applies.
Send the amended return with a covering letter by post.
Errors in returns may be difficult to rectify, and incorrect or late submissions can result in financial penalties. You are liable to pay £100 per fifty employees for each month or part month when P11D or P11D(b) returns are late. Penalties and interest are also payable for late payments to HMRC.
To try and help prevent errors prior to submitting the returns, take time completing them and be mindful of the following errors employers have been known to make:
submitting a duplicate P11D in addition to an electronic version
using a paper form for the wrong tax year
forgetting to sign a paper P11D(b)
not ticking the ‘director’ box when applicable
not advising HMRC a ‘nil’ P11D is due
reporting the full gross value rather than only the private-use amount where a benefit has been provided for business and private use
not completing the fuel benefit box/field where applicable.
Completing P11D returns is a complex area, but if you are armed with the information and knowledge required prior to starting and take time and consideration when completing them paying particular detail to what is being asking for, then all should be well.