P11ds and taxable benefits

During self-assessment season, organisations will also be working to ensure their P11d forms are completed for financial year-end.

Businesses are still evolving to adapt to individual’s working needs in these changing times, and with this comes a vast majority of employees benefiting from a more flexible working pattern. This has led to some businesses offering to reimburse their employees for their work from home expenditure such as broadband, utilities and mobile phone bills.

Employers may not know that the benefits and expenses they are providing for their employees are taxable. We asked our tax (link to tax team page) experts to outline what businesses might not be aware of.

What is a taxable benefit?

A taxable benefit can be either a non-cash benefit provided by the employer, or something paid on behalf of the employee by the employer.

As the benefits have a value, these need to be treated as the employee’s taxable income, similar to an employee’s salary.

Some of the most common benefits are:

  • Company cars/van
  • Private health insurance
  • Loans for rail cards
  • Directors overdrawn loan accounts

There are many, more possible benefits that will need to be reported. But you will be happy to know, there are plenty of exempt benefits that do not need to be reported.

Some of the most common exempt benefits are:

  • Staff entertainment within certain conditions
  • Uniform & tools for work
  • Workplace parking
  • Work related training

Reporting and Paying

Taxable benefits are required to be reported on a form P11D which has a submission deadline of 6th July, following the end of the tax year. 

A P11D is required for each employee who has a taxable benefit, the employee will pay the tax due on their benefits, either through their personal self-assessment return or through their PAYE coding.

Where benefits are provided, a P11D(b) needs to be submitted by 6th July following the end of the tax year. 

This form reports the Class 1A National Insurance due on the total sum of benefits provided for all employees. The rate of class 1A is 13.8% for 2021/22, rising to 15.05% from 2022/23. The business will need to pay this amount to HMRC by 19th July, if paying by cheque, or 22nd July if paying via bank transfer.

If the P11D(b) is submitted late, HMRC will levy a £100 penalty per 50 employees for each month or part month that the P11D(b) is late. This is however subject to a cap at the overall class 1A NIC liability.

PAYE health checks

A PAYE health check can provide reassurance that a business is meeting its obligations to HMRC. 

With HMRC compliance budgets increasing, there are likely to be more employer compliance checks in the future.

Where HMRC establish liability for PAYE or NIC, penalties and late payment interest will be applied.  An HMRC compliance check can look back as far back as 20 years, so finding potential inaccuracies now is better than an extensive investigation by HMRC tomorrow.

Can MHA Moore & Smalley assist my organisation with P11d forms?

If you would like to discuss this in more detail, or have any questions on P11d forms, please contact a member of the team by filling in the form below.