Employers must complete forms P11D each year for every employee who receives benefits or expenses by 6 July. From 2016/17 employers can “payroll benefits”. They must register to do this before the start of the tax year. HMRC will then amend the PAYE codes of all employees receiving these payrolled benefits to avoid a double tax charge. Most benefits can be payrolled except accommodation and beneficial loans. Employees must be advised of their benefits by 1 June following the year end. The employer’s declaration form P11d(a) and employer’s Class 1A NIC at 13.8% due on some benefits must be submitted and paid by 19 July. The tax on benefits can now be collected through the payroll provided the employer has registered.
The general rule is that benefits are valued based on the cost to the employer. There are also specific rules for certain types of expenses.
The benefit on company cars is dependent CO2 emissions and the list price. Where private fuel is paid for there is a fuel benefit. If the employee’s own car is used for employment purposes (not commuting) then they can be reimbursed at the Revenue’s suggested rates.
Where the reimbursement is greater than these rates a benefit will arise. If less then the employee can claim the difference as an expense.
Where benefits meet the definition of ‘trivial’ they can be excluded from the P11D, however, there is an annual cap of £300 on this exemption for directors their family and their household.
To be trivial the benefit must cost less than £50 to provide, it cannot be cash or a cash voucher, this does not include store gift cards.
There is an exemption for staff events that do not exceed a total of £150 per year.
Where the 6 July deadline is missed a maximum initial penalty of £300 per p11d can be applied by TMA 1970 s 98(1)(B) however these are not automatic and can only be applied by the General Commissioners on application by the Inland Revenue. Put matters right before this happens!
There is a maximum penalty of £3,000 for each incorrect P11d.
For the employer’s declaration (form p11d(a)) there are automatic monthly penalties from £100 per month.
Prepared 5 October 2017.
Updated 26 January 2018.