As a business owner, you may provide benefits in kind or non-exempt expenses, to some or all of your employees.
If so, you need to be aware of the annual P11D form that needs to be completed and sent to HM Revenue & Customs (HMRC) by 6 July 2019.
Before doing so, you will need to know what you need to report and if you need to pay tax and National Insurance (NI) on the benefits or expenses.
A P11D is a form used to report benefits provided and expense payments made to employees, by employers that are not putting it through the payroll.
The annual form allows businesses to report benefits that employees have received from their employer in addition to their salary, for example, company cars, health insurance, living accommodation and beneficial loans.
There are some benefits which can be provided tax-free, such as the provision of a mobile phone, social functions for staff and other ‘trivial benefits’, although there are various conditions that need to be met first.
For a social function to be tax-free, for example, the total cost must not exceed £150 per head, per year. The £150 includes VAT, together with any extra costs such as accommodation or transport. If the cost is more than £150 per head, the whole benefit is taxable.
To be eligible for a ‘trivial benefit’ exemption, all the following must apply: it cost £50 or less to provide, it isn’t cash or a cash voucher, it isn’t a reward for their work or performance and it isn’t in the terms of their contract. A Director of a close company (run by five or fewer shareholders) cannot receive trivial benefits worth more than £300 in a tax year.
If your business meets the above criteria then you do not need to update HMRC, or pay tax or NI on this benefit.
Understandably, the whole process of filling out the forms for P11D poses a significant burden for business owners and managers.
To further complicate the task, the rules governing the taxation of different expenses and benefits change regularly and each is subject to their own separate rules.
Completing P11D returns can be time-consuming and complex, especially if you cover a lot of expenses or have a large workforce, which is why it makes sense to outsource this task to specialists. To find out how we can relieve the burden on your business, please contact us.