P11D Benefits: Reporting and Paying Expenses and Benefits for Employers

What is a P11D?

Gold Coins on Top of Documents

A P11D form is a statutory requirement under UK tax law. It is used to report any benefit given to directors and employees. Any benefit over £8k must be reported.

The form is used to record information about payments of cash, goods or services. There are four categories into which the payment can fall. These are:

• Non-cash benefits

• Cash benefits

• Goods & Services

• Other expenses

Non-Cash Benefits

Who must file a Form P11D?

Form P11D is filed each year by employers. This document requires employers to report information about their businesses, including the number of employees they have, how much money they make, and what type of taxes they are required to withhold. Employers also must provide a list of names, addresses, Social Security numbers, dates of birth, and tax identification numbers for every employee.

Self-employed individuals must file form P12x if they pay themselves through a method other than salary or wages. These include tips, commissions, bonuses, fees, royalties, interest, dividends, annuities, rents, and gains from sales. They also include payments received from partnerships, limited liability companies, trusts, estates, S corporations, sole proprietorships, and government entities.

Filing P11Ds is required for all employees who work at companies that have over $100,000 in annual gross receipts. If you don’t know whether your company qualifies, ask your accountant.

When must I submit a P11D?

If you change your registered address within the same tax period, you must submit a P11D. This applies even if you haven’t changed your place of residence.

You must also file a P11D whenever you move abroad. If you live outside the European Union (EU), you don’t need to file a P 11D unless your total assets exceed £2 million.

What information must be provided on a P11D?

A recent article published by Inc. Magazine discussed how companies are required to disclose certain information about their employees to the Internal Revenue Service (IRS). In particular, the IRS requires employers to report compensation paid to employees for self-assessment fees, non-business travel expenses, and non-business entertainment expenses. These items must be reported on Form W-2, Wage and Tax Statement. However, there are some exceptions. For example, if the expense is reimbursed by the employer, it does not need to be disclosed. Also, if the expense is used for business purposes, it does not need be disclosed.

This list is not exhaustive, however, and you should consult with your tax advisor to ensure that you understand what is required under federal law. If you have questions regarding the disclosure requirements, please contact us.

P11D exemptions for some business expenses

The IRS recently announced changes to how it reports business income taxes (P11Ds). These changes include a new exemption system and some clarification around what types of expenses are eligible for exclusion.

Prior to April 2016, there had been a way to exclude certain expenses from P11D reporting requirements. This has now been superseded by a new exemption system that allows companies to opt out of having to report specific categories of business expenses.

Business travel, business entertainment, credits card usage, fees and subscriptions will all be exempt from reporting under the new rules. However, some businesses still need to report those items, which should be done through a separate form called P1C.

P11D penalties for late filing

HM Revenue & Customs (HMRC) has announced it will start fining companies £1,000 per day for failing to file P11Ds on time. This is the first step towards introducing fines for those who are late filing tax returns.

The government says the aim of the changes is to ensure businesses comply with tax laws.

If you fail to file a return on time, HMRC will fine you up to 5% of your turnover.

However, if you do not pay within four months, HMRC will charge you interest on the amount owed.

You could face a penalty of £10,000 – £100,000 if you owe over £50,000.

In addition, HMRC will suspend your licence to trade for three years, unless you pay off the debt within 12 months.

This includes the ability to apply for a new licence once the suspension period ends.

P11D Common mistakes

Directors’ loans are usually repaid during the next financial year. However, there are some exceptions where it might be paid earlier. For example, if a company goes into administration, the directors’ loans will normally be repaid within 12 months of closure. If the company continues trading, the directors’ loans must still be repaid within 12 months.

A director’s loan account is treated like any other employee benefit and therefore needs to appear on the relevant directors’ Personal Information Sheet (P11D). This includes information about how much interest is being charged on the loan, and how long the loan term is.

Make sure you’re aware of the rules around paying off a loan early. In most cases, directors cannot repay a loan early unless it is to avoid personal bankruptcy. If a company goes into administration or liquidation, directors can usually repay their loans up to six months prior to the date of the administrator/liquidator taking over the company. If the company continues to trade, directors can usually repay a loan up to three months prior to the date the administrators/liquidators takes control of the company.

If you want to know exactly what happens if you pay a loan off early, make sure you check the terms of the agreement you signed with the lender. There may be penalties for doing so.

Don’t take money out of the company bank account without checking whether you have permission to do so. Even if you think you’ve done nothing wrong, you could find yourself facing criminal charges if you’re caught.

Frequently Asked Questions

What Are Taxable Expenses?

Taxable Expenses are those costs incurred by a business which are treated as part of the cost of doing business, rather than being considered a personal expense. This includes things like rent, rates, utilities, insurance premiums, wages, salaries etc.

Does Possession of a p11d Imply Additional Tax Obligation?

If you receive a Form P11D from HMRC it means that you have received a benefit of employment which must be reported on your self assessment return. This benefit could include things like holiday pay, sick pay, maternity/paternity pay etc. You do not have to make a claim for each individual benefit; however, some employers require you to complete a form in relation to each benefit you have received.

The form itself asks questions about the nature of the benefit, how much you were paid, what activities you carried out whilst receiving the benefit and how many hours you worked during that period. Once completed you send the form to HMRC along with a copy of your payslip showing the amount of money you earned and the total number of hours you worked during the relevant period.

A common misconception is that if you have a P11D form then you automatically owe additional tax because you did not declare the benefit on your self assessment return; however, the fact that you received the benefit does not mean that you have to pay additional tax.

You might want to consider claiming the cost of the benefit though the company rather than yourself. Why? Because the employer already receives the benefit of having someone working for him or her and you don’t have to give up anything else for the privilege of being employed.

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