P11ds, Dispensations and Expenses

It’s P11d time of year again and for some businesses this will be the last year that they have to complete them.

For small businesses the area of employee expenses has always been one of the least understood and had some of the lowest compliance. Few small business owners are aware that up until April 5th 2016 if an employee of the Company did something as innocuous as pay for a train ticket for a business trip, and then get reimbursed for it from the Company, that payment should be recorded on a P11d even though there would be no tax consequence. To avoid this level of bureaucracy in the past it was possible to agree a dispensation with HMRC. These could either be individually agreed or there was an esoteric form called the P11dx which covered the standard ones that could be completed.

Since 6th April 2016 however the regime has changed. The P11d dispensation regime has ended and the associated benefits and expenses legislation has changed. The new legislation exempts expenses such as travel and subsistence from tax and NI as long as they are validated as legitimate expenses by the employer.

Additionally Companies may now “payroll” benefits such as Company Cars or Health Insurance. Unfortunately you have to register to do this before the start of the tax year to avoid doing P11d’s for that year. Full information on how to do this is available here: https://www.gov.uk/government/publications/payrolling-benefits-in-kind-draft-guidance/payrolling-benefits-in-kind

The combination of these changes should mean that P11ds become a thing of the past for most Companies. Some benefits will still need to be reported on a P11d though such as Interest Free loans from the company. Flat rate allowances will still need to be within HMRC guidelines or agreed with HMRC as well.

If you have any queries about employee benefits please do not hesitate to give us a call.