P11d Benefits in kind – reporting and dispensations

 
As the end of the tax year approaches, so does the task of declaring benefits in kind and expense payments paid to employees and directors for the tax year ending 5 April, this relates to all employers, sole traders, partnerships or LLP and companies.  
 
There are three return forms to be considered:
 
  • Form P11D; used to report expenses and benefits provided to an employee earning at a rate of £8,500 or more per year.  
  • Form P11D(b); used to report the total value of benefits and expenses paid to P11D employees and to report the Class 1A national insurance contributions due.
  • Form P9Dused to report expenses and benefits provided to employees earning at a rate of less than £8,500 per year.
 
The way in which a benefit is provided is important for determining its tax treatment and how to report it, there are different rules for declaration depending on the manner in which the benefit arises, i.e:
 
  • Employer arranges and pays directly for the benefit,
  • Employee arranges benefit and the employer pays for it,
  • Employee arranges benefit and pays for it then the employer reimburses the cost.

 

The return forms must be submitted to HMRC by 6 July following the end of the tax year. The employer is also required to provide details of benefits and expenses to each employee by the same date, for inclusion in their own self assessment tax returns (if applicable).
 

All transactions between employees and employers need to be declared, even if there is no tax liability. Forms must show the cash equivalent value of benefits or the taxable payment and any employee contribution to the cost.

The employer may be liable to Class 1A National Insurance and if so this should be settled by 19 July following the end of the tax year.

 
The employer maybe able to eliminate this burden by applying for a P11D reporting dispensation.
This agreement with HMRC removes the requirement to report certain expenses on forms P11D. Expenses covered by a dispensation are not liable to tax or class 1 or 1A NIC. 
 
A dispensation can apply for all expenses for which the employee would normally be able to claim as being ‘wholly, exclusively and necessarily’ incurred. Dispensations cannot be obtained for ‘round sum’ amounts.
 
Expenses which may be covered would typically include:
 
  • travel and subsistence
  • business entertaining
  • professional fees and subscriptions. 
 
If you would like any further advice on benefit in kind declarations then please contact a CFW Partner.
 

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