Act Now! Form P11D – Tax on Company Benefits

P11D – Employers return of Directors / Employee’s Expenses and Benefits in Kind

It is time to prepare the Forms P11D and P11D(b) for the 2020/21 tax year. The forms are the employer’s responsibility. They are required for directors or employees who are provided with benefits or for whom you pay or reimburse non-deductible expenses.

The Forms P11D and P11D(b) have to be submitted to HM Revenue and Customs by 6th July 2021 to avoid potential late filing penalties of up to £300 per P11D, plus £60 per day for continued failure, and £100 per 50 employee per month for the P11D(b). The Class 1A National Insurance liability is due for payment by 22nd July 2021 if paying electronically or 19th July 2021 if not. Late payment will incur interest charges.  In addition employees must be provided with a copy of their P11D by 6th July 2021.

Below is a schedule of the typical benefits in kind provided to employees and directors for your information. The schedule also details the applicability of either Class 1 NIC or Class 1A NIC to the benefit / expense and whether an entry is required on form P11D or the payment of the benefit should be subject to PAYE. Any PAYE and Class 1 NIC liability arising on a benefit / expense should be accounted for on the payroll system at the time the payment is made.

I also draw your attention to some important information regarding certain benefits in kind and expenses, and the completion of Forms P11D:

• With regard to business expenses there is a statutory exemption for specific payments, provided that they are not paid or reimbursed through a relevant salary sacrifice arrangement. This includes business travel and subsistence payments and professional fees and subscriptions paid or reimbursed to employees, where the payments would be an allowable deduction, i.e. the expense has been incurred “wholly, exclusively and necessarily” in the course of doing their job. These payments will not need to be returned on Forms P11D.

– A checking system must be in place to ensure that the expenses have been incurred and support the amounts paid or reimbursed, I would suggest that Expense claim forms are completed and authorised, in order to be able to demonstrate this.

• With regard to company cars and fuel available for private use, the appropriate benefit scale charge percentages have increased for 2020-21. The Fuel benefit charge, on which the emission percentage is applied, has been increased from £24,100 in 2019-20 to £24,500 in 2020-21, with a further increase to £24,600 in 2021-22. You may wish to review the value of these benefits for the coming year. The Fuel Benefit charge is an all or nothing charge, so if as little as £1 worth of fuel paid for by the company is used for private use the full Fuel Benefit charge will apply.

 

• Electric Cars from 2020/21 have a benefit in kind percentage of 0%, with hybrid cars with emissions less than 50g/km having a rate of between 0% and 14% based on the amount of mileage able to be done solely on electric.

 

• When a company car is initially provided the employer is required to send a form P46(car) to HM Revenue and Customs and you must ensure that the correct manufacturers’ list price along with full details of the car are returned. At a time when cars may be purchased at discounted rates it is important to ensure that the correct manufacturers’ list price is shown, as it is the manufacturers’ list price not the purchase price that is used to calculate the benefit charge.

 

• The advisory fuel rate for company cars was amended at 1 March 2021 (https://www.gov.uk/government/publications/advisory-fuel-rates/advisory-fuel-rates-from-1-march-2016)  It is reviewed four times a year and any changes will take effect on 1 March, 1 June, 1 September and 1 December.  You should ensure that the correct rate is used, as any payment by an employee to reimburse the employer for private fuel in a company car must at least equal the amount based on the published rates or the full Fuel Benefit charge will apply.

 

• The van benefit charge was £3,430 and fuel benefit charge was £655 in 2019-20, increasing to £3,490 and £666 respectively in 2020-21.

 

• Beneficial Loans with a combined outstanding value to an employee of less than £10,000 (2020-21) throughout the whole year do not need to be reported. The official rate of interest applicable to beneficial loans for 2020-21 is 2.25%.

 

• You do not have to pay Tax on Trivial Benefits provided to employees if all of the following apply:

 

– it cost you £50 or less to provide

– it isn’t cash or a cash voucher

– it isn’t a reward for their work or performance

– it isn’t in the terms of their contract

 

Expenses or Benefits provided in the 2020-21 Tax Year

Expense or benefit	Details	Class 1	Class	P11D or PAYE
		payable	1A due
Assets at employees disposal or given to employee	Including mixed business and private use	NO	YES	P11D
Car Fuel	Company Car	NO	YES	P11D
Car Fuel	Private Car – paid by company credit card, garage account or fuel pump	NO	YES	P11D
	Private Car – payment by any other method including excess mileage payments	YES	NO	P11D
Cars	Private use of company car	NO	YES	P11D
Childcare	Employer provides or contracts	NO	NO	P11D
	(Value allowed depends on rate of tax and when the scheme was joined.)
	Employee contracts and is reimbursed	YES	NO	PAYE
Christmas bonuses	Cash	YES	NO	PAYE
	Goods	NO	YES	P11D
Credit Card Payments	Goods and services for the employer	NO	NO	–
	Specific & distinct business expenses incurred by the employee	NO	NO	P11D
	Items for personal use	YES	NO	P11D
Expenses payments	Non business expenses, or where expenses are not checked and supported as business expense	YES	NO	PAYE/
				P11D
	Any profit element in the payment	YES	NO	P11D
Employee personal expenses paid by employer	Employee contracts	YES	NO	P11D
Mobile Phone	Phone provided by employer	NO	NO	–
(No tax on one mobile phone provided to any employee by the employer)	Phone bills paid by employer – employee contracts	YES	NO	P11D
Overdrawn directors loan account/beneficial loans	Non qualifying	NO	YES	P11D
	Written off	YES	NO	P11D
Personal Bills	Paid by the Employer	YES	NO	P11D
	Payment or reimbursed to employee	YES	NO	PAYE
Private Telephone / internet	Employer contracts with provider, rental and non reimbursed private expenses	NO	YES	P11D
	Employee contracts with provider, rental and private calls	YES	NO	P11D
Private medical insurance	Employer contracts with provider	NO	YES	P11D
	Employee contracts with provider	YES	NO	P11D
Round sum allowance	Not matched by specific business expense	YES	NO	PAYE
School Fees	Employer contracts with School	NO	YES	P11D
	Employee contracts and is reimbursed	YES	NO	PAYE
Subscriptions – not qualifying for tax relief	Employer contracts	NO	YES	P11D
	Employee contracts	YES	NO	P11D
Trivial Benefits	Provided meets full conditions shown above	NO	NO	NO
Vans and Fuel	Available for private use	NO	YES	P11D

 

If you require any further information regarding the completion of forms P11D, or whether certain benefits in kind are still cost effective, please speak to your Lambert Chapman LLP Partner or your usual Tax Department contact.

Payroll Service Available:

If you already benefit from Lambert Chapman LLP providing you with a service to complete forms P11D, you may wish to consider using our internal Payroll Service for completion of your PAYE / CIS records and RTI forms. Please contact Pip Trowles our Payroll manager for a quote.

 

> Posted by Angela Pannell

 

 

 

 

Disclaimer: The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.