What is a P11D form – Business Owners Common mistakes

P11D form is used to outline the cash value of benefits given to employees or taxable expenses which are not wholly and exclusively for business purposes. It is up to the employer to analyse all benefits and expenses given to its employees and report the figures to HMRC.
What are the P11D expenses and benefits? 

These are expenses and benefits that companies provide to employees which the employees are liable to pay tax on. Below are some examples of expenses/benefits which are required to be reported on a P11D form:

• Private medical insurance schemes
• Living accommodation
• Low/interest-free loans (also known as ‘director’s loans’)
• Cars, vans and/or fuel provided by the company for private use (where vans are provided, incidental private use is allowed)
• Mobile phones (unless the contract is in the company’s name)
• Vouchers (if they are childcare vouchers, it applies for any excess over £55pw
• Professional fees/subscriptions
• Heath Insurance
• Non- Business Travel Expenses

Are there any exemptions when completing the P11D form? 

It’s not necessary to inform HMRC of some routine employee expenses, such as business entertainment expenses and phone bills. This rule applies as long as you’re either paying back your employee’s actual costs or paying a flat rate to your employee as part of their earnings. ‘Trivial’ benefits in kind are also not included. A benefit is considered trivial if it is:

• less than £50 in value
• not performance-related
• not a cash equivalent
• not a salary sacrifice
• not part of your employment contract

Who needs to file a P11D?

P11Ds are filed by the employer, not the employee – although, for many freelancers and contractors, they’re one and the same.

What is a P11D(b)?

On HMRC’s website, you will sometimes see Form P11D(b) referenced. A P11D(b) is a form employers must submit, summarizing the individual P11D forms they’ve completed for their employees. 

What is class 1A National Insurance?

Certain benefits attract additional National Insurance contributions; this is known as Class 1A NIC. It is an employer liability which is a cost to your Company, For 2020/21.  it is calculated at 13.8% of the total value of any benefits liable to Class 1A.

When do I have to pay this by?

The Class 1A NIC is payable to HMRC by 19th July 2021 (For the tax year 20/21).

What happens if the P11D deadline is missed? 

You will receive a penalty of up to £100 per 50 employees for each month or part month your P11D(b) is late and charged penalties and interest if you’re late paying HMRC”

There are also penalties incurred from incorrectly submitted P11D forms, so employers need to exercise care and vigilance when going through the process. Penalties are calculated based on a percentage of the potential revenue lost according to the taxpayer and level of culpability (this can actually be up to 100% of the tax owed). It is vital that employers check and double-check their P11D forms to ensure that every taxable benefit is accounted.

P11D Common mistakes

Directors’ loan accountsAs a director, you don’t need to pay interest on the money you owe to the company – provided the director’s loan is less than £10,000.  If your Directors’ loan account (DLA) is overdrawn by more than £10,000 at any point in the tax year, HMRC will expect interest to be paid on the total overdrawn amount. This should be charged at the HMRC published rate of interest (2.25% for the 2021/22 tax year) and will need to be paid by the relevant director.
The overdrawn amount is effectively a loan from the business to the director, is treated as an employment-related benefit and must be included on the relevant director’s P11d Form. If you need to pay loan interest on an overdrawn DLA, then the company will also need to pay Class 1A NICs on the interest payments rate is 13.8%.