P11D administration takes on a whole new complexity with the introduction of Optional Remuneration Arrangements (OpRA) from 6 April 2017. Now we have to look at each benefit and decide whether the employee.
If either situation applies, the employee has agreed to receive a benefit via an OpRA and new calculation methods come into play. However, I would say that the OpRA rules have ‘grandfathering’ periods (to 5 April 2018 and 5 April 2021). Although, these only apply when the OpRA is in place before the start of the 2017-18 tax year. Any new, renewal, variation or modification of an arrangement on or after 6 April 2017 falls under the OpRA rules in 2017-18. See the ‘Transitional provisions’ section on page 137 of Booklet 480.
Fast forward to 13 November 2017 and HMRC’s release of the P11D and Working Sheets in draft form for 2017-18. These do help clarify the reporting requirements where they apply in 2017-18 – i.e. to those OpRAs that are not subject to the grandfathering and, indeed, are impacted in the first place.
The draft P11D for 2017-18 should really be read alongside the Booklet 480. Employers need to ensure that they are looking at the 480 that was updated on 13 September 2017 and contains Appendix 12 that looks at OpRA.
The Working Sheets
I want to point these out individually and whether they have impacts if the benefit is provided via OpRA:
Number 1 – Living Accommodation
Working Sheet 1 for 2017-18 has been amended right at the bottom where the calculation of living accommodation provided via an OpRA is detailed.
Number 2 – Cars and Car Fuel
Working Sheet 2 has not changed and is not for use when a company car has been made available via an OpRA.
Although, Working Sheet 2 may be needed if the OpRA modified cash equivalent value is less than the OpRA amount foregone.
Number 2b – Cars and Car Fuel via OpRA
The starting point with OpRA is always Working Sheet 2b. Although, it is important to point out that the OpRA rules do not apply to cars with CO2 emissions of 75 grams per kilometre (km) or less. In these cases, Working Sheet 2 must still be used to ascertain the cash equivalent.
If the car has CO2 emissions greater than 75g and it is provided by OpRA, employers need to calculate the modified cash equivalent rather than the cash equivalent. Use Working Sheet 2b for this calculation.
Bear in mind that you may need to revert to using Working Sheet 2 once you compare the modified cash equivalent to the amount foregone and find that it is less.
Number 3 – Vans and Van Fuel
Working Sheet 3 is unchanged and cannot be used for vans provided via OpRA. See Appendix 12 in Booklet 480 (page 133) which explains that the benefit to be declared requires a comparison of the modified cash equivalent of the benefit of the van and the amount foregone.
Number 4 – Interest-free and Low Interest Loans
While unchanged, the form can be used for beneficial loans provided under OpRA. Take a look at Example 9 on page 134 of Booklet 480 that gives a good example of the OpRA comparison that will need to be done.
Number 5 – Relocation Expenses
Number 6 – Mileage Allowance Payments (MAPs)
Working Sheet 6 is another one that is unchanged but cannot be used when Mileage Allowance Payments (MAPs) have been provided using an OpRA (MAPs are payments that are made to employees using their own vehicles and reimbursement of mileage is using HMRC’s Authorised Mileage Allowance Payments (AMAP) rates).
Have a look at 11.1 on page 136 of Booklet 480. This gives a good example of OpRA in conjunction with the use of AMAPs and how there is now a reporting requirement.
Please make sure your processes and procedures are in place for the first OpRA reporting, which may be at the end of tax year 2017-18.