Blogs/Vlogs

A reminder for employers – 2016/17 benefits and expenses

22 June 2017

6 July 2017 is a key reporting deadline for employers who provided employees with taxable benefits in kind during 2016/17, or reimbursed employees’ business expenses.

Any relevant items must be reported to HMRC using forms P11D and P11D(b) by 6 July 2017.  We have put together some general pointers regarding P11D completion to help those who have not yet completed this task.

What needs to be reported?

It is not possible to provide an exhaustive list as the scope is wide.  Company vehicles and private health insurance are familiar items but others are perhaps less obvious.  Interest free loans, for example, are taxable if the balance exceeded £10,000 during the tax year. This applies to directors’ current accounts as well as loans to employees.

The concept of lower paid employees (earning less than £8,500 per year) was abolished from 2016/17, so you should now consider all employees when completing forms P11D.  If a third party provides your employees with benefits there may be a requirement for you to report that, depending on the arrangements.

What may be excluded?

You may have previously held a dispensation, allowing you to exclude certain reimbursed business expenses when completing forms P11D.   However dispensations were abolished from 2016/17 and replaced by a general exemption for expenses.  This exemption covers most of the items that would have fallen under the dispensation and so in many cases will not change the entries needed.  However, if your dispensation included any bespoke rates for expenses you would need to approach HMRC for an ‘approval notice’ to cover those items in the same way.

Items that you have agreed with HMRC to voluntarily payroll can be excluded.  Under this new regime from 2016/17 onwards, certain items may be payrolled instead of being reported on forms P11D.  Remember that you need to register with HMRC before the start of the relevant tax year to do this, and you will still need to complete forms P11D for any items that are not payrolled,

Any items covered by a PAYE Settlement Agreement (PSA) can also be excluded.  This is effectively an arrangement employers can make with HMRC to cover minor and irregular items.  It allows the employer to exclude PSA items when completing forms P11D, and to bear the tax payable by the employee.

Some benefits in kind are specifically exempt and do not need to be reported, but remember that exemptions are subject to specific conditions and it is important to make sure these are met each year.

What do I do next?

Once you have completed forms P11D you must ensure that these are submitted to HMRC together with form P11D(b) by no later than 6 July 2017.  You should still submit form P11D(b) by this date even if you payrolled all of your benefits in kind.  If you have an active PAYE scheme but have nothing at all to report you should file a ‘nil’ P11D(b) by the above deadline.

Each relevant individual should be provided with a copy of their form P11D by no later than 6 July 2017.  Any Class 1A National Insurance due must be paid to HMRC by 19 July 2017 (or 22 July 2017 if paying electronically), to avoid late payment charges.

HMRC have the power to charge penalties for late submission of the forms and also for errors and omissions.  Given the risk of penalties and myriad of rules it is worth taking advice to make sure that you are fulfilling your obligations.  For assistance or further information regarding P11Ds please contact your usual UHY adviser.

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