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 your company to notify these expenses for each director or employee after 5th April each year. There are penalties based on a percentage of lost revenue dependent on taxpayer behaviour.
A P11D (b) is the form that is sent in to HMRC with the P11D showing the amount of any additional tax or Class 1A National Insurance due on the expenses and benefits. Where no benefits have been paid during the tax year ending 5 April 2021 and a form P11D(b) or P11D(b) reminder is received, employers can either:
Essentially taxable expenses and the cash equivalent of company assets provided for the private use of the director will still need to be reported on the form. Both are referred to as benefits in kind.
They are expenses which the business incurs directly but have a personal benefit to you. For example, this could be if the business has paid for expenses from which you derive personal enjoyment such as gym membership. More information on expenses can be found via the Knowledge Centre on Brookson Connect.
These expenses will show in your company bank account but, unless you have claimed them on the expenses form and submitted receipts to us, we may not know what they are and so they will not appear on your P11D. If you believe there are any of these, please call us to discuss.
As noted above, where the company incurs costs or provides assets for the private use of the director these normally result in a Benefit in Kind charge. In respect of taxable expenses, the amount to report on the P11d form is equal to the amount of the expense. Where an asset is provided for private use, the amount to report on the form is the cash equivalent value –how this is calculated is dependent on the asset in use. Both are referred to as benefits in kind.
By reporting these amounts on the P11d, this means additional tax is payable personally and potential Class 1A National Insurance is payable by the company Generally, Benefits in Kind fall into several categories and depending on the type of benefit there may be a Class 1A National Insurance Charge.
The following are examples of taxable benefits and expenses which you should tell us about:
There is a requirement to report your benefits in kind on the form and record these benefits of employment on your self-assessment return, therefore there will be additional tax to pay in this respect.
If you believe that additional tax may become due relating to a particular expense, we suggest that you contact a member of the Brookson team to discuss whether or not you still wish to claim the expense through the company.
Therefore, your claim forms which have been processed through the system represent expenses which you believe are wholly, necessarily and exclusively for the purposes of your trade and so can be paid to you tax free.
You will not require a copy of a P11d form as there are no benefits in kind to report.
The company, however, is still obliged to confirm to HMRC that there are no benefits in kind to report and no Class 1A National Insurance to pay as part of the P11d process.
Once you are satisfied that the information on the P11D is correct, Brookson, as your tax agents, will submit these forms on your behalf in time for the annual 6th July deadline.
Completing a P11D for a director and employees who are in receipt of company benefits or expenses is a necessity and there are serious consequences for failing to comply including penalties based on a percentage of lost revenue.
Brookson makes every effort to ensure that the details on the P11D are correct based on the knowledge we have of the expenses you have claimed from your company. However, you should be aware that there can be penalties for incorrect P11Ds.
To avoid such penalties, it is important that you advise us of any expenses or benefits we may not be aware of. For example, expenses which you have paid directly from the company without submitting a claim form that you believe should be reported. Remember it is ultimately your responsibility to provide accurate information to HMRC.
Allowable expenses are the costs incurred for the sole purpose of making profits for your business.
For expenses paid by the company to be allowable they must satisfy HMRC criteria that they are wholly and exclusively for the purpose of the trade. Similarly, expenses paid by you are only allowable if they are incurred wholly, necessarily and exclusively in the performance of the duties of your office or employment.
Allowable expenses are no longer required to be shown on your P11D form –but you do need to claim your expenses on an expense claim form for these amounts to be relieved against your company profits.
We may contact you if we consider that you may have incurred a Benefit in Kind and follow this up with advice explaining the full tax implications of claiming the cost. You will be given the opportunity to decide whether to go ahead and make the claim or not. However, it is important that you consider any of the categories above and whether the company has paid for any expenses from which you would have received personal benefit. If you are unsure, please contact us.
The value of any benefits must be reported annually by means of a P11D.
Any taxable benefits will also be reflected in your PAYE tax code to ensure that tax is collected throughout the year rather than ending up with tax underpaid at the end of the year.
Certain benefits attract additional National Insurance contributions; this is known as Class 1A NIC. It is an employer liability which is a cost to your company but does not count towards your contributions for state benefits. For 2021/22 it is calculated at 13.8% of the total value of any benefits liable to Class1A.
The Class 1A NIC is payable to HMRC by 19th July 2021 (in the case of 20/21).
As an employer you will be issued with a separate special payslip for paying the Class1A due or it can be paid via an approved electronic method. Please refer to HMRC website.
Our Expense Guidelines highlight the types of expenses which can be claimed tax free from your business.
Detailed HMRC guidance on all of the above can be found via HMRC website or alternatively in the HMRC booklet ‘480(2018) Expenses and Benefits - A Tax Guide’.
