The P11d process: Are you prepared?

It’s important to remember that July 6 is the deadline for the submission of forms P11d (return of expenses and benefits). If this is not complied with, then penalties may arise. The penalty for an incorrect P11d is £3,000 per P11d form and £300 for a late P11d return.

The whole P11d process was turned upside down when the rules changed to take away dispensations. So if you still complete the forms P11d to only report items not covered by a dispensation, you need to think again. The rules now require that you are obliged to report any item which, in the hands of the employee, may be considered taxable.

It is important to remember that if you decide that an expense or benefit is not taxable in the hands of the employee, and HMRC challenge it, this it will be at your risk. If you have any doubt when making this decision, you must either seek advice or disclose the item on the P11d.

There is no need to report items on a P11d when it’s your intention to settle any liability on a PAYE Settlement Agreement. In addition, you are excused the reporting of expenses which are within the HMRC benchmark allowances or bespoke agreements.

A benchmark allowance is a prescribed rate which can be paid for items such as meal allowances when an employee is away from their employment base. The bespoke agreement is something the employer will have agreed with HMRC for meal or overnight allowances - like lorry driver sleeper cab allowances.

I still find there is total confusion, with employers, about the changing world of expenses and benefits reporting. Sadly the information available on HMRC does not seem to resolve the questions. We are seeing some HMRC challenges on employers who have not adjusted their procedure and are seeking retrospective tax with interest and penalties.

So, in my view, before you start the process it is worth checking your systems to see what you pay and provide to employees, as well as to ensure that the P11d information correctly picks up what it should and you can then proceed with a sense of comfort.

Our Discussion Forum is up and running, so share your knowledge and opinions on P11d forms to help others learn and understand.