Along with the P60 and P45, the P11D is one of the HMRC PAYE forms that employers should be most familiar with. As the 6 July deadline for submitting the 2020/21 P11D to HMRC approaches, are you sure of exactly what must be included and how to avoid the common pitfalls? Let’s take a closer look.
What is a P11D?
The P11D is a statutory form required by HMRC from UK based employers which details the cash equivalents of benefits and expenses they have provided during the tax year to directors and employees. By 6 July 2021, employers should have filed the 2020/21 P11D, provided a copy to employees and also told HMRC the total amount of Class 1A National Insurance owed on form P11D(b). Any Class 1A National Insurance due must be paid to HMRC by 22 July.
What is recorded on a P11D?
In a nutshell, any item a company pays for that the employee benefits from needs to be included in one of 14 sections on the P11D form. These expenses and benefits include:
- Company cars
- Loans for rail season tickets
- Other loans
- Health insurance
- Assets provided to an employee that have significant personal use
- Self Assessment fees paid by the company
- Non-business travel expenses
- Non-business entertainment expenses
The majority of employee business expenses are not recorded on the P11D. Exempt expenses include business travel, entertaining expenses, business credit cards and subscriptions/fees.
P11D penalties and pitfalls
The penalties for incorrect or late returns can be significant. If you miss the 6 July deadline, you have about a fortnight to put things right. After that, your company will incur fines of £100 per month (or part month) per 50 employees. This will be followed by reminders and details of the ongoing penalties. If HMRC believes you acted carelessly, deliberately misled or attempted to conceal your liabilities, penalties of 30-100% of the owed tax could be imposed.
There are some frequently made P11D mistakes, for instance, these non-taxable benefits that are sometimes included on a P11D:
- Annual Christmas parties or similar functions, costing up to £150 per head. Multiple functions are added together for the purposes of the £150 limit and any that are not wholly within this are taxable
- One mobile phone in the name of the company. Reimbursed private phone bills are completely different
- Childcare vouchers (within certain limits, depending on the tax rate of the employee)
- Annual health screening/medical check-up – ensure company is contracting with provider
- Subsidised canteen available to all staff
- ‘Trivial’ benefits, e.g. a turkey at Christmas (£50 limit, not cash or equivalent)
Keeping your records up to date and reconciling your accounts frequently will help the smooth and accurate submission of your P11D. If you have any questions about what should be included on your P11D, the experts at CRM can help. Please call us on 01865 379272.