The 6th July deadline for reporting year-end expenses and benefits via the P11D forms is rapidly approaching. These can be submitted to HMRC online using either commercially available software or HMRC’s PAYE Online Service which is only available for employers with up to 500 employees.
Furthermore, any additional National Insurance Contributions (“NIC”) must be paid to HMRC by 22nd July 2022.
The P11D is used by employers to report certain expenses or benefits provided to employees. Employers will be liable for National Insurance on the relevant benefits, and this will be calculated as part of the submission.
As a general rule, any expenses which are paid by the employer that benefit the employee may be classified as a benefit in kind and are liable to be reported on the P11D. Common benefits are usually defined as:
- Company cars and fuel
- Private healthcare and insurance
- Interest free loans
- Subscriptions and professional fees
- Certain childcare arrangements
Click here for a detailed list of potential expenses and benefits.
Failure to deliver the P11D by the deadline or delivery of incorrect returns will result in penalties and interest.
Reporting payrolled benefits
If an employer wishes to payroll benefits, it must register with HMRC to do so before the start of the tax year in which it wishes to commence payrolling.
Registration is through the payrolling employees’ taxable benefits and expenses service, and the benefits to be payrolled must be outlined.
The employer must calculate the cash equivalent value of the relevant benefit and add it to employment income taxed via the payroll.
If the cash equivalent is not known at the start of the tax year, an estimate can be made and adjusted when the relevant information is available.
These benefits do not need to be reported on a P11D and HMRC will amend the employees’ tax codes in respect of those benefits.
If the registration deadline is missed, an informal payrolling arrangement may be agreed with HMRC, but forms P11D must still be completed at the end of the tax year and marked ‘Payrolled’ to prevent double taxation.
A form P11D(b) must be filed in respect of payrolled expenses benefits.
Covid-19 and P11Ds
HMRC agreed certain relaxations to P11D reporting in light of the changes brought to working practices by the pandemic. It is important to note that some of these ended on 5th April 2022. For example:
Home working costs – employees could claim tax relief for an un-receipted allowance of £6 per week for the whole of 2020/21 and 2021/22, if they were required to work at home for any part of the tax year.
From 6th April 2022, the relief is only available where the employee is required to work from home.
Home-working equipment – there was an exemption for the reimbursement of employee’s costs or purchasing equipment obtained for the sole purpose of enabling the employee to work from home as a result of Covid-19. From 6th April 2022, this will be taxable in the same way as before the pandemic.
Employer-provided Covid-19 testing for employees – the costs of Covid tests are not treated as a benefit subject to tax and NIC. This exemption and NIC disregard have been extended to 5th April 2023.
If you are an employer, you must ensure you have communicated any relevant changes to your employees.
If you are unsure if you need to file a P11D or if you would like clarification, please don’t hesitate to contact us.
As always, if you would like any further information regarding the above, please feel free to contact our offices by email firstname.lastname@example.org.