P11ds & Benefits in Kind
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- May 23, 2023
In this article we will look at what a P11d is, who will be required to file them, and we’ll also take a look at some examples of items that need to be included on a P11d.
The P11d form is used to inform HMRC of Benefits & Expenses paid for an employee in addition to their salary, and are the responsibility of the employer rather than the employee. There will be an individual P11d form for each employee, and each of these must be filed with HMRC before the 6 July following the tax year the benefit relates to. Therefore, for benefits provided in 2022/23, we have until 6 July 2023 to report the benefits to HMRC.
The reason there is a requirement to file P11ds is so that HMRC collect the correct amount of Employers National Insurance from each employer. Not all employers will be required to file a P11d, however if you’re unsure or on the fence about whether something will be regarded as a Benefit in Kind, please get in touch.
Read on for some examples of benefits that do need to be reported on a P11d:
Company car benefits
To calculate the benefit, you will need the list price of the car when new, adding on the value of any accessories purchased, and subtracting any capital contributions that the employee has made (up to a maximum of £5,000).
This amount is then multiplied by a percentage dependent on the cars Co2 emissions. You can find the list of these here:
https://www.gov.uk/guidance/company-car-benefit-the-appropriate-percentage-480-appendix-2
Any diesel cars will have a 4% supplement, up to a maximum of 37%. The Class 1A due will then be 14.53% of the amount of the P11d value calculated above.
A separate benefit will arise where private fuel costs are reimbursed.
Accommodation
If you’re providing accommodation to an employee, and this accommodation is not essential for their job (for example a pub landlord, caretakers of blocks of flats, teachers in boarding schools etc) then this will need to be included on a form P11d.
Loans to employees (including overdrawn directors loans)
However if the loan is below £10,000, the benefit will be nil. This is the aggregate of all loans, to prevent abuse of the rules by offering a series of loans to the same employee.
Vouchers
For example, high street store vouchers. The benefit will be the cost to the employer of providing the voucher to the employee.
Also, if a credit card, or any other document is given to the employee which gives them the right to obtain goods or services, this will be a taxable benefit.
Vans and Van fuel
If a van is supplied to an employee and there is personal use, this is subject to an annual flat rate benefit of £3,600. Like cars, there is a separate benefit for fuel, of £688 per annum.
Dispensations?
Up until 2016, many businesses applied to HMRC for dispensations. Dispensations allowed certain benefits to be provided to employees without being included on a P11d. The main types of dispensation were business entertainment expenses, travel & subsistence costs associated with business travel, and uniform/tools for work.
These are no longer required to be reported to HMRC as they are covered by exemptions.
Exempt benefits
- Provision of one mobile phone per employee (including any associated personal calls)
- Reimbursement of removal expenses – for example, when an employee is transferred to another office, and the employer pays relocation expenses such as legal fees in association with the acquisition of a new residence, costs of transportation of belongings, replacement of domestic goods, as long as the total costs are less than £8,000.
- Workplace parking, and any season tickets paid for a car park close to work
- Staff canteens
- Work related training, for examples courses and exams
- Provision of £150 per head for the Christmas party (if the amount is exceeded, the whole amount of the benefit is taxable – not just the excess over £150).
- Late night taxi’s when employees are occasionally required to work late
- The first £500 of advice provided by the employer in a tax year in relation to the employee’s pension arrangements or use of pension funds, provided the advice is provided under a scheme made available to all employees
Exemption for Trivial Benefits
Trivial benefits are benefits which cost £50 or less to provide, and it isn’t cash or a voucher. The payment must also not be part of an employees contract.
PAYE Settlement arrangements
A PAYE Settlement arrangement is a formal agreement entered into by an employer and HMRC, the idea behind which is that the agreement allows the employer to settle an employees tax liability on minor or irregular benefits or expenses payments.
A benefit or expense can be included in a PSA if it’s:
- Minor
- Paid on an irregular basis
Where it is impractical to apply PAYE or apportion the value of a particular benefit which has been shared by a number of employees, these can also be included in a PSA. Common items to include in a PSA are things such as staff entertainment exceeding the tax free £150 per person, and relocation expenses that exceed the earlier mentioned £8,000.
A PSA can be entered into at any time before 6 July following the end of the first tax year to which it relates. This is an enduring agreement which does not need to be renewed.
If you think it would be beneficial to enter into a PSA with HMRC, get in touch with one of the team today.
If you have any further queries regarding the above, please do not hesitate to contact our Tax Manager.