In this article, we take a closer look at the P11D form, what you need to include, when you need to file it, and – most important of all – what will happen if you don’t fulfill your P11D duties.
What is a P11D?
The P11D form is used to report Benefits In-Kind, these items or services which you (or your employees) receive from your company in addition to your salary. This can be as private healthcare, interest-free loans (to pay for train season tickets, for example) and company cars. The annual P11D form allows you to report these items to HMRC on your annual Self Assessment return.
As benefits in kind effectively increase your salary, there may be National Insurance Contributions (NICs) to be paid on them. It is important to note these contributions will be paid by the company, not the individual.
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.
When do I need to file a P11D?
To your advantage, P11D filings aren’t dependent on your company year. This must all be filed by 6th July following the tax year in question. So, your P11D for the tax year running 6th April 2018 to 5th April 2019 must be filed by 6th July 2019. Any tax due must be paid to HMRC by the 22nd of July each year.
What needs to be included in a P11D?
Generally speaking, any items the company pays for and that the employee benefits from a need to be included on the P11D form. Expenses and benefits that need to be reported to HMRC are:
- 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
P11D Exemptions for Certain Business Expenses
Prior to April 2016, expenses could be left out from P11D forms by obtaining a special dispensation from HMRC.
This has now been replaced by an exemption system, whereby the majority of Business Expenses incurred personally by company employees no longer need to be recorded on a P11D form. Exempt expenses include:
- Business Travel
- Business entertainment expenses
- Credit cards used for business purposes
- Fees and subscriptions.
P11D Penalties for Late Filing
As with most tax filings, HMRC is ready and waiting with the penalty hammer if you file late or incorrectly. If you miss the deadline of 6th July (either online or on paper), you won’t incur penalties straight away – you have about a fortnight to put things right and file. Supposing that July 19th comes and goes and your P11D has still not been submitted, your company (not you personally) will incur fines of £100 per month (or part month) per 50 employees.
Assuming you still haven’t filed by November, HMRC will send you a reminder, along with details of all the penalties you’ve accrued up until then. If your P11D is incorrect, you could also face fines – but only if HMRC believes you deserve them.
On the other hand, if your mistake was genuine and HMRC believes you took reasonable care before filing, you might not face any fines. However, penalties of 30%, 70% or 100% of the owed tax can be applied if HMRC believes you acted carelessly, deliberately misled them or attempted to conceal your true liabilities.
P11D Common mistakes
Directors’ loan accounts
As 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 (2.5% for tax year 2018/19) 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 in 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 (the current rate is 13.8% for the 2019/20 tax year). The company is required to complete Form P11D(b) and submit it to HMRC.
Finally, make sure that you’re not caught out by Bed & Breakfasting. This is where you settle a director’s loan by depositing personal cash, only to withdraw the same amount within 30 days.
Home phone usage
The cost of calls made by employees by their home telephone or personal mobile, the company has repaid the expense and can be overlooked. Be sure to keep a note of all your business phone usage and make sure every call is included. A company mobile phone is strongly recommended to avoid any confusion.
All tax filings, the accuracy of your P11D form is only as good as the data used to complete it. Try to keep your records up to date, reconcile your accounts often and address any problems early. If you stay on top of your accounts, filing your P11D will be a walk in the park.
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, summarising the individual P11D forms they’ve completed for their employees.
If you would like to contact us regarding your tax return, contact us on 0207 537 6628.