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How do employers report P11D expenses and benefits?

Employers have an annual obligation to complete forms P11D in respect of each employee in receipt of taxable employment benefits or expenses.

  • Deadline for filing online is 6 July
  • Employer Class 1A NIC on taxable benefits is payable by 19 July
  • If the individual benefit is hard to calculate or unusual it can be included on a PAYE Settlement Agreement (PSA) instead
  • Employers may use HMRC’s form or set up their own spreadsheets for reporting.
  • A P11D must be accompanied by an employer’s declaration.
  • Penalties apply for late filing or incorrect submissions.

From 6 April 2016:

  • There is no longer a benefits exemption for lower earners.
  • Benefits may be payrolled: employers must still file P11Ds for these.
  • There is a statutory exemption for 'Trivial' benefits, subject to annual cap of £300 for directors of close companies

From 6 April 2017:

  • There is an exemption for paid or reimbursed expenses that would otherwise be tax deductible for the employee: pre 6 April 2017, these would have had to have been reported or HMRC would have to have agreed that a dispensation applied.

Overview and FAQ

  • Employers are obliged to report benefits provided to their employees by reason of their employment on form P11D.
  • Forms P11D must be accompanied by form P11D(b), which shows the Class 1A NIC due, and both must be filed with HMRC by 6 July.
  • Employer Class 1A NICs is due, at 13.8%, on benefits other than excess mileage allowance, expenses reimbursed and items where Class 1 NIC is due.
  • The Class 1A NIC must be paid by 19 July.
  • The employer must complete a declaration to confirm that it has completed forms P11D correctly and to confirm the amount, if any Class 1A NICs due.
  • The P11D must also be provided to current employees automatically and former employees on request.  Note that the form must be completed for anyone who received benefits during the year, even if they have since left.

The general rule is that benefits are valued based on the cost to the employer, but there are a number of exemptions and special rules as follows:

Accommodation 

  • Temporary accommodation while working at a temporary workplace is not a benefit
  • Job related accommodation by custom or necessity is excluded
  • Otherwise special calculation rules apply

Company Cars (other than Pooled Cars)

  • The taxable benefit is a based on the level of CO2 emissions and the list price.

Company car: fuel

  • If any element of private fuel is paid for, the whole amount of fuel benefit falls into charge: commuting is private travel
  • The fuel benefit multiplies the percentage used for company cars, based on CO2 emission, by a fixed rate
  • If business mileage is reimbursed at more than HMRC’s fuel only rate the full benefit applies
  • If the employee repays private mileage at less than this the full benefit applies
  • HMRC fuel only rates update every quarter 

Private car mileage allowance

  • A benefit in kind arises to the extent that reimbursement exceeds the AMAP rates: any shortfall can be claimed as an expense by the employee.

Vans

  • Employer provided vans are not a benefit provided that any personal use is minimal and incidental. Otherwise the Van benefit is £3,230 for the van and £610 for fuel.

Loans

  • Loans in excess of £10,000 will generate a benefit in kind, to the extent that interest charged is less than the official rate of interest (3% for 2016/17).
  • The benefit is based on the average loan balance for the period:
    • Take the oustanding balance at the beginning of the tax year, or the amount borrowed if the loan was taken out during the year
    • Add the outstanding balance at the end of the tax year, or the final repayment made if the loan was repaid during the year
    • Divide the result by 2 for the average loan
    • Multiply by the official rate of interest and apportion for the number of complete months the loan was outstanding
  • If the averaging method produces an unsatisfactory result, the taxpayer or HMRC can insist on using a strict method which calculate the interest daily based on the outstanding balance each day: HMRC normally only insist on the strict method if there is significant distortion.

Subscriptions and other personal expenses

  • How the benefit is taxed depends on who the contract is with and who pays as follows:
  Contract name
  Employer
Employee
Supplier paid direct by employer
P11D for tax and NIC
P11D for tax
Class 1 NIC through the payroll
Employee reimbursed by employer
P11D for tax and NIC
Payroll for tax and Class 1 NIC

 

Other assets made available to the employee for private use (without transfer of capital)

  • These generate a benefit equal to the expenditure incurred by the employer on the asset, e.g. maintenance costs etc. plus the higher of:
    • 20% of market value (the annual value)
    • Hire charge or rent paid by the employer

Trivial Benefits

Where benefits meet the definition of 'trivial' they can be excluded from the P11D, however, there is an annual cap of £300 on this exemption for directors their family and their household.

A benefit is trivial if all the below conditions are satfisfied:

  • It cost less than £50 to provide: this can be calculated on an average basis if provided to more than one employee
  • Is not cash or cash voucher, this does not include store gift cards, e.g. Amazon, M&S etc. can qualify
  • Is not a reward for work or performance
  • Is non-contractual

The benefit is all or nothing. If the cost is £51 per head, then it is taxable in full. There is no annual limit for employees other than that applicable to directors, family and household.

Staff Parties

  • Entertaining is a benefit. There is an exemption for Annual functions that do not exceed a total of £150 per head in the year. This is VAT inclusive.
  • Note that this is an exemption, rather than an allowance, so you cannot cover part of an event. You can choose which events are covered if more than one falls within the £150 per head exemption.
  • If the combined cost of two functions total less than £150 per head, they can both qualify.
  • Staff may object to having to pay tax on entertainment, particularly if attendance is compulsory. An alternative would be to include any events not covered by the exemption in a PAYE Settlement Agreement.

PAYE Settlement Agreement (PSA)

  • A PSA can also be used where it is hard to allocate the benefit between employees.
  • Under a PSA, tax and Class 1B NI, at 13.8%, are payable by the employer on the grossed up benefit.
  • The deadline to enter into an agreement with HMRC is 6 July following the end of the tax year.


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