How to avoid P11D problems

Until the Office of Tax Simplification’s recommendations on reducing the administrative burden of P11D reporting are implemented, by 6 July following the tax year end employers need to:

• file with HMRC a P11D for each employee with reportable expenses and benefits; and
• give each person who was an employee at the tax year end a note of the information on their P11D.

There will be other year end payroll reporting obligations, but real time information reporting has not changed P11D reporting. Employers will be filing over 4m P11Ds for 2013/14. The penalty for late submission can be £300 per form, with possible £60 daily penalties per form, and with penalties of up to £3,000 per return for incorrect returns.

So how do you avoid problems and penalties?

Clearly, it is helpful if there are good systems in place to identify and record reportable expenses and benefits, and sufficient resource is allocated to preparing and reviewing the forms before submission. Comparing the forms to last year’s submission may help identify continuing benefits and in-year leavers. Where you have a P11D dispensation to avoid reporting agreed expenses, be sure you know what it covers. If there is no dispensation, all expenses (even if wholly business) not covered by a specific exception must be reported. It is worth considering applying for a dispensation for the future.

The calculation of any company car benefit will require its original list price. Any fuel benefit will need to be correctly disclosed.

If loans have been made that exceed £5,000 at any point in the tax year (the £10,000 limit only applies from 6 April 2014), ensure these are disclosed. If it has continued from the previous year, make sure the 2012/13 closing balance agrees to the 2013/14 opening balance.

Where personal expenses are reimbursed, check these have been correctly categorised for class 1A NIC purposes (for example, subscriptions to professional bodies, not tax deductible, can be treated differently).

Form P11D(b) will need to be filed for any class 1A NIC liabilities. The total P11D expenses subject to class 1A NIC on this form may require adjustments (for example, for an employee seconded to the UK who has supplied a certificate of cover from their home country and for whom no NIC is due). Appendix 1 to form CWG5 can be a useful guide: completing forms P9D, P11D and P11D(b); HMRC’s Expenses and benefits from employment toolkit and CWG5: Class 1A NIC on benefits in kind.