For employers, P11D forms are an important part of reporting to HMRC each year and must be filed on time and correctly.
A P11D form is required by HMRC from all the United Kingdom based companies for each employee and director to declare any benefits in kind that the individuals have received during a year. You can use commercial software or PAYE online service to submit your P11D forms.
In this blog, we’ll cover all you need to know about P11D forms, including filing, qualifying expenses and common mistakes people make when completing P11D forms.
What is a P11D form?
As an employer, at the end of the tax year you’ll usually need to submit a P11D form to HM Revenue and Customs (HMRC) for each employee or director you’ve provided with expenses or employment benefits in kind.
There are two different types of P11D forms you need to understand. These are:
- P11D form – this is where you declare benefits in kind for each individual employee and director.
- P11D(b) form – this is a form where you summarise all the P11Ds you’ve submitted. It tells HMRC how much Class 1A National Insurance you need to pay on all the expenses and benefits you’ve provided. It shows the total benefits in kind provided by the business.
Who needs to complete a P11D form?
All employers need to file a P11D form for any employees or directors that have received benefits in kind. You will also complete this form for company directors or if you’re registered as self-employed.
A separate form P11D needs to be completed for each director or relevant employee.
If there aren’t any taxable benefits in kind to declare, then you don’t need to complete a form.
What are benefits in kind?
Benefits in kind (BIK) are non-cash benefits, or perks, that you provide to employees or directors on top of their salary or wages.
These are taxable benefits that individuals may need to pay income tax on, and you may need to pay National Insurance Contributions (NIC) on these benefits as an employer. They need to be reported to HMRC annually.
How do I report and pay for tax on a benefit in kind?
The responsibility to declare any benefits in kind that have been received by directors or employees is on you as an employer.
Reporting is completed by the employer to HMRC by submitting a P11D form and a P11D(b) summary report.
These forms should be submitted to HMRC by 6 July following the tax year in which the benefits were received. For example, if an employee was in receipt of BIKs between 6 April 2022 to 5 April 2023, the P11D form deadline would be 6 July 2023.
The form provides a list of all possible taxable benefits which the employer selects the relevant ones and states the value of the benefit that was provided to the employee. A copy of this form should also be provided to the employee.
What are taxable benefits?
Benefits given to individuals that don’t make up part of their taxable earnings and provide significant personal benefit are classed as benefits in kind. Many of these benefits have high value and by taxing and paying NI on these benefits, HMRC prevents employers from reducing salaries and topping up a salary with expensive benefits and saving tax and NI.
Below is a list of some of these benefits, but this is not a complete list. A full list can be found on the government’s website here.
- company cars.
- mileage allowance payments.
- car fuel benefit.
- vans and van fuel.
- private medical treatment or health insurance, including dental insurance.
- low or interest free loans, often referred to as director’s loans.
- interest-free loans to employees for things like rail season tickets.
- vouchers that cover things like childcare costs (childcare vouchers over £55 per week).
- living accommodation.
- relocation expenses.
P11D exemption – what doesn’t need to be included?
You don’t need to include all expenses on your P11D, there are some exempt expenses. These include things like:
- office supplies.
- business travel expenses.
- stock and materials.
Do employees pay income tax on benefits in kind?
Employees will need to pay tax on benefits in kind they receive. Employers normally deduct this and pay this throughout the year.
How are benefits in kind taxed?
Both and employer and employee will pay tax on benefits. The employer in the form of Class 1A National Insurance and the employee in the form of income tax.
Any benefits reported annually by means of a P11D form should be reflected in an employees or directors PAYE tax code to ensure that tax is collected throughout the year rather than ending up with tax underpaid at the end of the year.
Class 1A national insurance on benefits in kind
Certain benefits attract National Insurance contributions; this is known as Class 1A NIC.
It is an employer liability which is a cost to a company but does not count towards an employee’s national insurance contributions for state benefits.
The cost to provide BIKs is an allowable tax-deductible expense which means it can be taken off profits for corporation tax purposes.
Who do you provide benefits to?
At the end of each tax year, you must provide details about any employees or directors (including their families or households) you have given:
- expenses payments.
For most purposes ‘family or household’ is defined as the employee’s:
- spouse or civil partner.
- children — including their spouses or civil partners.
When is the P11D deadline?
You have a legal obligation to report any expenses and benefits to HMRC at the end of the tax year. Your P11D must be filed by 6 July for the previous tax year, and any taxes must be paid by 22 July.
When you don’t complete a P11D
Do not complete a P11D if:
- there are no taxable expenses, payments or benefits to be returned for an individual.
- the expenses and benefits have been taxed through your payroll.
When do you need to complete a form P11D(b)
Use the form P11D(b) to declare the amounts of Class 1A National Insurance contributions you’re due to pay for the year.
You must also complete and sign a form P11D(b) if you’re liable to return any expenses payments or benefits on form P11D.
It’s important to file all HMRC forms accurately and on time – and this includes your P11D forms.
There are penalties if you do not make returns or if you submit incorrect returns on forms P11D and P11D(b), either carelessly or deliberately.
The P11D late filing penalties apply if you miss the deadline by two weeks. After this you’ll be fined £100 each month (or part month) your form is late, for every 50 employees.
There’s also a penalty for making an incorrect return, or for deliberately submitting incorrect information. This penalty is a maximum of £3,000 for each form.
P11D common mistakes
P11D forms can be complicated, and mistakes do happen. The handling of director’s loans is one area that can cause problems. If the company provides a director a loan up to £10,000, directors don’t have to pay any interest on it. However, if a director’s loan amount exceeds the limit of £10,000 at any time in the relevant tax year, the director needs to pay interest on the total withdrawn amount. The overdrawn amount will be considered as a loan from the company and needs to be included in the director’s P11D form.
Incorrect or late filing
Keep your records up to date and identify any problems in your payroll or accounts as early as possible so that you don’t make errors at the time of filing your P11D forms. Be aware that if your P11D is incorrect, you may face a fine unless HMRC accepts it was a genuine mistake. If they suspect you acted carelessly, aimed to deliberately mislead or attempted to reduce your tax liabilities, penalties of 30%, 70% or 100% of the owed tax can be applied.
Where a car that has been provided to an employee, people often put the wrong value of the car on the P11F. The form must include the list price of the vehicle.
Submitting a list
Where the P11D information is submitted in list format rather than on P11D forms, then HMRC’s quality standard requires it must:
- be presented in an easy-to-read format using a font size no smaller than 11-point Arial when printed.
- be organised by employee, not by type of benefit.
- include the employer’s reference.
- include each employee’s name, national insurance number, date of birth and gender.
- include all the expenses and benefits provided to an employee on the same list – HMRC cannot accept separate lists for each benefit.
Duplicated information is often submitted by companies. For example, where P11D information has already been filed online, the employer may submit the same information on paper to ensure ‘HMRC have received it’.
Mixed business and private use
Where a benefit has been provided for mixed business and private use, some employers only enter the value of the private-use portion but full gross value of the benefit must be reported. This may be for things like phones etc.
The detail you record on a P11D form is only as good as the data used to complete it, so make sure you keep your records up to date and stay on top of your accounts throughout the year. Using accounting and payroll software will make your P11D process much more efficient and quick.
It is important to file your P11D forms and P11D(b) forms on time and with accurate information to avoid penalties and issues with HMRC. There are many items that may be classed as a benefit in kind and reporting them can be complex. It’s up to you as an employer to ensure that you complete these forms correctly.
dns accountants provide accurate and timely payroll services, including completion of P11D forms. Contact our team for help and to answer all your P11D or payroll questions on 03300 886 686, or email on firstname.lastname@example.org.
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