It’s that time of year again when you’d like to be winding down for your holiday but then there’s the small matter of the P11Ds to get out of the way. Use our checklist to make sure you’re on top of this annual task

Step 1 – have you utilised all the opportunities not to report benefits or expenses on employees’ P11Ds. There is no reporting due for:

Exempt items – there are over 120 exemptions which cover everything from the provision of day to day office facilities to company mobile phones. There is a useful list here which HMRC provide for employees completing SA returns, but it’s just as useful for employers

Included in the exemptions are business expenses that meet the ‘wholly necessarily and exclusively’ rules ie there is no, or insignificant, private element to the expense that has been incurred

  • Benefits or expenses that have been included in a PAYE settlement agreement (PSA) – the PSA must to be agreed before 6 July to avoid P11D reporting
  • Items that meet the trivial benefit exemption ie they are provided for personal or seasonal reasons and the value is not more than £50 including VAT each time they provided
  • Extra statutory concessions: as their name suggests they are strictly speaking outside the law, HMRC agrees not to ask for them to be reported on the P11D. They are few and far between now as most have been incorporated within the law
  • Benefits that have already been payrolled for tax purposes
  • Benefits that have been fully ‘made good’ by 6 July by the recipient via a payment out of net pay

Step 2

Have you considered all the ways that benefits and expenses are provided to employees in your organisation, as this can also flush out items that had been forgotten about, but are clearly taxable/Ni’able. These are all the ways that benefits and expenses can be provided:

Employer makes contract with 3rd party to provide benefit

  • Employer makes an asset available for use
  • Employer transfers an asset

Employer pays 3rd party, but employee arranges benefit

  • Employee is reimbursed for contract with 3rd party
  • Employer gives employee a voucher to get a benefit
  • Employee uses company credit card
    ,; on behalf of employer
    and on behalf of employee
  • Employer provides cheap loan
  • Employee uses employer’s services
  • Employee gives up salary for benefit in kind (Type A OpRA)
  • Employee can choose between a benefit and cash (Type B OpRA)

You also need to consider whether you provide any benefits and expenses to people who are not employed by you and whose employer has not been involved in the provision of the benefit

If so, you need to set up a Taxed Award Scheme (TAS) to pay the tax and national insurance, and let the individual know if they are a higher or additional rate taxpayer might be some more tax to pay and that they should let HMRC know

Step 3 · For the complex sections of the P11D use the working sheets that HMRC provide. For company cars there are two

  • Worksheet 2 for cars provided in addition to salary
  • Worksheet 2B where the car is provided under type A OpRa (salary sacrifice) or where the company offers a car allowance or a company car, as choosing the company car is deemed a type B OpRA NB it is possible that you will get a negative value using working sheet 2B. That is correct and is due to a mistake in the legislation that will be corrected for next year’s P11Ds

Step 4

Once you’ve completed the P11Ds, don’t forget about the P11D(b). This is the return of all the Class 1A national insurance that is due:

  • On the benefits shown on the P11Ds, and
  • Any benefits that have been payrolled, payrolling only deals with the tax that is due unless the benefit in kind is from sections B, C or possibly M of the P11D. these are the sections that are subject Class 1 national insurance, so the amount should have been included in notional pay for national insurance in the payroll at the point in the year that the benefit was provided. The fact that the sections have no Class 1A box alongside them on the P11D doesn’t mean that they are exempt from National Insurance, it is because HMRC assume that the National Insurance has already been paid in year. If the Class 1 was overlooked I the payroll you should be making an Earlier Year Update (EYU) or a YTD FPS if your software has moved to this new file, to correct the National Insurance position for both employee and employer.

Step 5

Pay the Class 1A National insurance by 22 July