P11Ds – what do I need to report?

If you run a business, you might also provide benefits, or non-exempt expenses, to some or all of your employees. If you do, it is important to be aware of the P11D form that needs to be completed and sent to HM Revenue & Customs (HMRC) by the deadline of 6 July 2019 (which is a Saturday this year).

Before doing so, you will need to know what you need to report and if you need to pay tax and National Insurance (NI) on the benefits or expenses.

A P11D is a form used to report benefits provided and expense payments made to employees, by employers that are not put through the payroll.

A form P11D(b) may still be required though, even where such benefits and expenses are run through the payroll.

The annual form allows businesses to report benefits that employees have received from their company in addition to their salary, for example company cars, health insurance, travel expenses and childcare.

Provided your business meets the following criteria, social functions for staff are classified as a tax-free benefit for your employees.

The total cost must not exceed £150 per head, per year, the £150 includes VAT together with any extra costs such as accommodation or transport. If the total cost is £151 or over, the whole cost for any of the social events that exceed the cumulative £150 limit is taxable.

To be eligible for a ‘trivial benefit’ all of the following must apply: it costs £50 or less to provide, it isn’t cash or a cash voucher, it isn’t a reward for their work or performance and it isn’t in the terms of the employee’s contract.

If your business meets the above criteria then you do not need to update HMRC, or pay tax or NI on this benefit.

Another P11D element to be mindful of is for a Director of a close company (run by five or fewer shareholders), if they receive trivial benefits worth more than £300 in a tax year, then the benefits above £300 become reportable on a P11D.

Understandably, the whole process of filling out the forms for P11D purposes poses a significant burden for business owners and managers.

To further complicate the task, the rules governing the taxation of different expenses and benefits change regularly and each are subject to their own separate rules.

Therefore, it is important that employers plan ahead to ensure they do not find themselves struggling with completing and submitting these complex forms. For professional advice on this and other payroll, tax and accountancy-related matters, please contact MGI Midgley Snelling LLP today.

For the full list of expenses and benefits that you need to report, please click here.