Regular salaries are covered under PAYE, with employers having to calculate and pay income tax and National Insurance.
A P11D is the form used to report expenses and benefits paid to directors and employees which have not been subject to PAYE tax. HMRC require companies to notify these expenses for each director or employee by 6 July each year.
What is a P11D form?
Put simply, a P11D is a document used by businesses to report all benefits in kind (BIKs) to HMRC. You must include any goods or services you and/or your workers receive from your company in addition to your regular salary.
The employee is then taxed for the BIKs through their self-assessment tax return or by adjustment to their PAYE coding notice.
Do I need to complete a P11D?
It is the employer’s responsibility to file P11Ds with HMRC, not the employees’.
The annual deadline for P11D forms is 6 July, which will cover the nearest complete tax year. So, for the 2020/21 tax year, the deadline is 6 July 2021.
What benefits must be recorded?
Any employee benefits which are paid for by the company must be included on the P11D form. Common examples include:
- Company vehicles and fuel
- Other loans or financial benefits
- Private health insurance
- Staff entertainment including social events
- Reward schemes with non-cash rewards
- Self-assessment accountancy fees
- Non-business travel or entertainment expenses
- Any goods or assets with personal use.
What are the rules for directors’ loans?
Directors are not required to pay interest on money owed to the company of up to £10,000. However, if the directors’ loan account is overdrawn by more than £10,000, HMRC will need to see that interest is paid by the benefitting director. The rate is 2.25% for the 2021/22 tax year.
The loan benefit must be documented on the director’s P11D form.
Is additional National Insurance due on BIKs?
Employers are required to pay Class 1A National Insurance contributions on BIKS provided to employees. The Class 1A National Insurance rate is 13.8% for 2020/2021 tax year.
Are there any benefits which are non-taxable?
Some items which are exempt include:
- Annual social events where the cost stays below a threshold
- Low interest loans below a certain value
- A mobile phone provided to an employee
- Monetarily ‘trivial’ benefits in kind
Are there any penalties for late or inaccurate reporting?
If you miss the 6 July filing deadline, your company can be fined £100 per month per 50 employees.
If you file your P11D, but it is inaccurate, you could also be fined. Genuine mistakes are unlikely to be punished, but penalties of 30%, 70% or even 100% of the owed tax can be enforced if HMRC finds evidence of deliberate attempts to conceal tax liabilities.
Should you have any questions regarding your P11D reporting or need our help get in touch at enquiries@cowgills.co.uk
Disclaimer
The information was correct at time of publishing but may now be out of date.
