What is a P11D?

 19 Nov 2018

P11Ds are a statutory form that HMRC (Her Majesty's Revenue and Customs) required to be completed by all UK based employers. P11Ds will affect all companies with employees earning more than £8,500 annually (expenses and benefits included), who also are entitled to the reimbursement of expenses not covered by any dispensation, or if they are receiving benefits in kind paid directly to them. Now, those reimbursements or benefits in kind can take place only if:

  • There's a contract between the employee and a provider, and the employer makes payments on behalf of the employee.

  • A contract between the employee and a provider where the employer reimburses the employee.

  • There's a contract between a provider and the employer, where the employer makes payments on behalf of the employee directly to the provider.

What constitutes the benefits and/or expenses?

Vehicles - Company cars, vans and motorcycles (that were used for private use; mileage and fuel allowances do count).

Telephone - Reimbursements and usage of mobile phones and payments for the use of landlines.

Health Insurance - Any private medical insurance along with its pertinent subscriptions and fees.

Credit/debit card - Payment expenses.

Loans - Low interest/ interest-free loans.

Childcare - It can be either supported by the employer, or childcare costs.

It also includes other benefits and expenses like living accommodation, partner expenses on business trips, night transportation and assets provided to an employee that may have a significant personal use. Keep in mind that some of these benefits and expenses are above the £8,500 threshold, such items must be recorded on the form as well.

Any company that provides benefits and expenses to its directors or employees is required by law to inform these actions in detail to HMRC. Now, if such benefits were offered during the tax year, then a P11D form must be submitted by each part involved followed by a P11D (b) that will outline all payments pending to Class 1A National Insurance Contributions.

Submission Deadlines

The deadline for submitting the P11Ds is July 6th, now, if companies miss that one they will not be charged with penalties and fines just yet, they get a “second deadline” until July 19th, after that date penalties start taking place.

Late Submission Penalties

After July 19th, penalties apply for each unpaid month, and it is calculated at £100 per every 50 employees. The HMRC will send a notification before July 19th, as a reminder, but after that second deadline, companies will receive a penalty notice four months after the deadline. This means that the initial penalty is going to be of £400. As you can see it is best to get the P11D info sorted out as soon as possible. 

Three things people need, to make sure that their P11D form is ready to be submitted:

  • Employers reference.

  • Employee´s name, DOB (Date Of Birth), NI (National Insurance) Number and gender.

  • Precise details of relevant activities. This means a complete in-depth detail of the benefit that has been made.        

Once companies have this information complete, they must include the total value of all expenses and benefits granted during the year. It is important to adjust the full amount to the expenses and benefits that are not suited for Class 1A NIC (National Insurance Contributions). Also, keep in mind the vast range of expenses and benefits that can be included. In our previous section, we covered these and as you can see they include things like fuel, mileage and even extend to benefits paid to family members of directors or employees.

Before submitting a P11D form it is very important to take all considerations into account, especially when compiling sensitive information from directors/employees, and the HMRC know this, and so here you can find an additional guide related to the P11D form and its variations. It also offers additional info about particular scenarios and how to handle them. We´re talking about instances where benefits and expenses are already processed through payroll and how to conduct these processes successfully online.

Expenses and Benefits Through Payroll

A new scheme was introduced recently, and this new model enables users to handle benefits in kind through payroll. This means that all deductions of income tax for benefits in kind that employers grant to employees can now be processed using PAYE (Pay As You Earn), PAYE is a system to pay income tax and National Insurance tax contributions.

Performing all the legal obligations for HMRC including P11D expenses and payroll can be difficult for many small businesses, especially when they’re inexperienced in their understanding and processes. Outsourcing payroll companies offer a solution to alleviate the burden imposed on small business owners and ensure that they don’t encounter any financial penalties from incorrect or late submissions.