Ever heard of P11D? It’s a tax form in the UK that Company Owners use to tell HMRC about the perks and expenses they’ve given to employees. These perks might not be part of the salary, but they do still have tax implications.
Why do we need P11D?
In simple terms, the P11D helps HM Revenue and Customs (HMRC) calculate the tax that should be paid on the extra benefits employees enjoy. These include a company car, health insurance, or other non-salary benefits and the P11D form allows you to report them to HMRC.
Who needs to file a P11D?
P11Ds are filed by the employer, not the employee, although for freelancers and contractors, they’re often one and the same.
What’s in the P11D?
Any items the company pays for and that the employee benefits from need to be included so we’re talking about things like:
- Company cars. If you provide a company car to yourself or to your employees, then HMRC want to know about it.
- Fuel for Company cars. You’ve got the company car, and if the company pay to fill the tank, HMRC needs to know.
- Health insurance. If you offer private health cover to employees.
- Interest-free loans. If you provide a loan to employees without interest, and the loan is over £10,000.
- Assets on loan. If you or your employees use company assets for significant personal use.
- Mileage. If you’re doing a lot of miles and getting paid above the company mileage allowance.
- Non-business travel expenses. If you provide travel expenses that aren’t work-related, they need to be added too.
P11D exemptions for certain business expenses
You don’t need to report some routine employee expenses, and they are known as an ‘exemption’. The main types of expenses to which the exemption applies include:
- Business travel;
- Business entertainment expenses;
- Credit cards used for business purposes;
- Fees and subscriptions;
- Uniforms and tools for work; and
- Phone bills.
To qualify for an exemption, you must be either:
- paying a flat rate to your employee as part of their earnings – this must be either a benchmark rate or a special (‘bespoke’) rate approved by HMRC;
- paying back the employee’s actual costs.
The P11D process made easy
Employers get the job of filling out P11D forms for each eligible employee by July 6 after the tax year ends. They will also submit a P11D(b) which summarises the individual P11D forms completed for their employees.
Employees then get a copy of their P11D by July 31. This helps them square up with HMRC when they do their personal tax returns (if they do), and could alter their tax code.
And the tax?
The values in the P11D get added to what you earn so it can bump up your income tax and National Insurance and HMRC wants to make sure you’re paying the correct amount.
P11D penalties for late filing
As with most tax filings, HMRC will fine you for late filing or errors. If you miss the deadline of 6th July (either online or on paper), you won’t incur penalties straight away – you have a couple of weeks to put things right and file.
P11D common mistakes
- Director’s loan accounts. As a director, you don’t need to pay interest on money you owe to the company – provided the director’s loan is less than £10,000. If your directors’ loan account (DLA) is overdrawn by more than £10,000 at any point in the tax year, HMRC will expect interest to be paid on the total overdrawn amount. The overdrawn amount is effectively a loan from the business to the director and so is treated as an employment-related benefit.
- Home phone usage. The cost of calls made by employees from their home telephone or personal mobile where the company has repaid the expense can be overlooked. Getting a company mobile phone is an easy way to avoid any confusion.
- Forgetfulness. As with all tax filings, the accuracy of your P11D form is only as good as the data used to complete it so try to keep your records up to date, reconcile your accounts often and address any problems early. This should make completing your P11D a lot easier.
The P11D form is a necessary requirement for HMRC, and so if you can keep your records up to date, your future self will most definitely thank you!
If you would like some advice or guidance regarding P11D, get in touch with a member of the team.