What is a P11D Form? - More Than Accountants

What is a P11D Form?

This article will discuss P11D forms in detail. At the end of this article, you should have a deeper understanding of what a P11D form is, what information is written on it, how and when to file it, important things to consider when filing it and what your duties are in accomplishing it.

What is a P11D?

A P11D form is filed annually and is mainly used in reporting benefits in kind to HMRC. These will then be reflected on your Self-Assessment return. Benefits in kind are additional items or services that employees receive from a company on top of their salaries. Examples of these are healthcare benefits, interest-free loans, and even company cars.

Since benefits in kind are given in addition to employees’ salary, the company may need to pay National Insurance contributions on the items or services given.

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Who needs to file a P11D?

Filing a P11D is the responsibility of the employer. However, for some freelancers or contractors, they may need to file the P11D on their own.

When can I file a P11D?

All P11Ds are filed every 6th July following the tax year. This means that P11Ds are not filed according to the company’s financial year. For instance, P11Ds filed on 6th July 2020 are for the benefits in kind received from 6th April 2019 to 5th April 2020.

What do I need to include on my P11D form?

All items and services paid for by the company or given as benefits to the employee must be included on the P11D form reported to HMRC. Examples of these expenses or services are:

  • company cars
  • loans for rail season tickets
  • other loans
  • health insurance
  • assets given to employees that they have significantly benefited from
  • Self Assessment fees paid by the company
  • Expenses incurred during non-business trips
  • Expenses from non-business entertainment

Business Expenses Exempt From P11D

The government used to allow omission of certain expenses from P11D forms. All employers need to do is secure a special dispensation from HMRC.

Now, an exemption system is applied to identify expenses that are not required to be reported on a P11D form. Examples of these expenses are:

  • Expenses on business trips
  • Expenses from business-related entertainment
  • Expenses charged on credit card for business-related transactions
  • Fees and subscription charges

Penalties for Late Filing of P11D

P11Ds that are filed late have corresponding penalties from HMRC, similar to other taxes filed. Fortunately, HMRC is not as stringent when it comes to P11D forms. Although the deadline is set to 6th July every year, employers who fail to submit P11Ds on this day are not penalised right away. The company is given a fortnight, usually until 19th July, to file the P11Ds. If, after this day, the company is still unable to file the P11D, it will be fined £100 per month per 50 employees.

If November comes and the company still hasn’t submitted the P11D form, then, HMRC will issue a reminder with all penalties incurred. Incorrect P11Ds are also fined if HMRC deems it necessary. However, if HMRC proves that any mistake made was unintentional and that due diligence was applied when filing the P11D, then HMRC might decide against charging any fine. If, on the other hand, HMRC sees that the company has lapses and deliberately fabricated documents or data to avoid being held liable, then HMRC will impose 30%, 70%, or 100% penalties.

Common Mistakes in P11Ds

Director’s Loan Accounts (DLAs)

If a director takes out a loan from the company then he is not required to pay any interest, as long as the loan does not exceed £10,000. Taxes will only apply if the director’s loan account is overdrawn by £10,000. In this case, the director must pay taxes, applying a 2.25% interest rate, for 2020/21 tax year, on the total overdrawn amount.

This overdrawn amount must be declared on the P11D form of the director and recorded as an employee benefit given by the company since it is a loan benefit from the business to the director.

As the director pays interest on the total overdrawn loan amount, the company also pays National Insurance contributions (Class 1A) on the interest payments. The rate for tax year 2020/21 is 13.8%. Apart from this, a P11D form (b) must be submitted, by the company, to HMRC.

Directors must also make sure not to engage in any bed and breakfasting practice. Bed and breakfasting is done by repaying an existing loan, only to take out the same amount within 30 days.

Home Phone Usage

Sometimes, business calls are made using an employee’s personal mobile phone or home telephone. The phone expenses are paid by the company but these can be easily overlooked. It is important to keep track of all business calls made to make sure these are included on the P11D. Having a separate company phone is even better to make it easier to monitor business-related phone calls.

Neglect / Forgetfulness

Filing a P11D form does not need to be as tedious as other taxes filed. To ensure that your P11D is complete and accurate, be sure your records are updated and your accounts are reconciled. Completing your P11D should be a breeze as long as your files or your records are in order.

What is a P11D (b)?

A P11D(b) is a summary of the individual P11D forms of employees. This form is accomplished by the employer and submitted to HMRC.

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