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Do you know your P11D deadline?

P11D deadline – due at HMRC by 6 July 2018

The P11D deadline for the year ended 5th April 2018 is 6th July 2018, when P11Ds should be received by HMRC, together with P11D(b)s in respect of Class 1A National Insurance that is owed.   The employees should be given a copy of the information at the same time.  Payment of the Class 1A National Insurance should reach HMRC by 22nd July 2018 (19 July if you pay by cheque).  There is a penalty of £100 per 50 employees for each month or part month if your P11D(b) is late.  You’ll also be charged penalties and interest if you’re late paying HMRC. If HMRC have asked you to submit a P11D(b), and you don’t owe any Class 1A National Insurance you need to complete the appropriate declaration which can be found here.

PAYE Settlement Agreement (PSA)

This allows you to make one annual payment to cover all the tax and National Insurance due on minor, irregular or impracticable expenses or benefits for your employees.

If you get a PSA for these items you won’t need to:

  • put them through your payroll to work out tax and National Insurance
  • include them in your end-of-year P11D forms
  • pay Class 1A National Insurance on them at the end of the tax year (you pay Class 1B National Insurance as part of your PSA instead)

How to get a PSA

Write to HM Revenue and Customs (HMRC) at: Business Tax Operations, PSA Team, Benton Park View, Newcastle NE98 1ZZ, describing the expenses and benefits you want the PAYE Settlement Agreement (PSA) to cover.

Once they’ve agreed on what can be included, they’ll send you two draft copies of form P626.  Sign and return both copies. HMRC will authorise your request and send back a form – this is your PSA.

If HM Revenue and Customs (HMRC) approves your PAYE Settlement Agreement (PSA) before the start of the tax year, you can include any expenses and benefits contained in the agreement.  If they approve it after the start of the tax year, you might need to report some items separately.  After 5 July 2018 you can’t apply for a PSA for the 2017 to 2018 tax year.

If your PSA is approved before 6 April 2018

You must use form P11D to report expenses and benefits provided before the agreement date that you:

  • have already included in your employee’s tax code
  • have included in your employee’s PAYE tax and National Insurance deductions
  • should have included in your employee’s PAYE tax and National Insurance deductions

If your PSA is approved between 6 April 2018 and 5 July 2018

You must use P11D to report expenses and benefits provided during the 2017 to 2018 tax year that you:

  • have already included in your employee’s tax code
  • have included in your employee’s PAYE tax and National Insurance deductions
  • should have included in your employee’s PAYE tax and National Insurance deductions

When to pay

You must pay any tax and National Insurance owed under a PSA by 22 October after the tax year the PSA applies to (19 October if you pay by post).

HMRC have introduced some new methods of dealing with BIKs and a brief explanation of these methods is shown below:

Paying tax on benefits through your payroll

You can deduct and pay tax on most employee expenses through your payroll (sometimes called ‘payrolling’) as long as you’ve registered with HMRC before the start of the tax year (6 April).

You don’t need to submit a P11D form for an employee if you’re paying tax on all their benefits through your payroll. You’ll still need to submit a P11D(b) form so you can pay any Class 1A National Insurance you owe.

Expenses covered by an exemption

You don’t have to report certain business expenses and benefits like:

  • business travel
  • phone bills
  • business entertainment expenses
  • uniform and tools for work

To qualify for an exemption, you must be either be: paying a flat rate to your employee as part of their earnings – this must be either a benchmark rate or a special (‘bespoke’) rate approved by HMRC or paying back the employee’s actual costs.

You must deduct and pay tax and National Insurance on all other expenses and benefits you give to your employees, and report them to HMRC as normal.

When to apply for an exemption

When paying or reimbursing qualifying expenses in full, employers do not need to apply to HMRC for agreement to do so, they need only satisfy themselves at the time of making the payment that the expense would be fully deductible also you don’t need to apply for an exemption if you’re paying HMRC’s benchmark rates for allowable expenses. You only need to apply for an exemption if you want to pay bespoke rates to your employees.

Checking expenses

There must be a system in place to check payments reimbursed or made at the benchmark or bespoke rates. Employees aren’t allowed to check their own expenses, so someone else needs to do this to make sure they’re legitimate. Employees should keep proof of their expenses, for example receipts or bills.

Linda Eales – Vantage Fee Protect Tax Consultant

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