Telling HMRC about benefits in kind
Where taxable benefits and expenses have been provided to employees in 2017/18, these need to be notified to HMRC on form P11D by 6 July 2018, unless the benefit has been payrolled. Form P11D(b) – the Class 1A National Insurance return and employer’s declaration that all required P11Ds have been filed – must reach HMRC by the same date.
Form P11D is used to report taxable benefits and expenses provided to employees. The form is used, regardless of the amount that the employee earns – since 6 April 2016, the same rules apply to all employees and directors.
A P11D needs to be completed for each employee and director to whom taxable expenses and benefits have been provided in the 2017/18 tax year. Payrolled expenses should not be reported on the P11D, nor should any expenses and benefits included within a PAYE Settlement Agreement or those covered by an exemption.
Where benefits have been payrolled, they do not need to be included on the P11D. However, they must be taken into account in the Class 1A National Insurance calculation on form P11D(b).
Exempt benefits do not need to be included on the P11D – where an exemption applies, there is no tax to pay. This might be a specific exemption, such as that for mobile phones, or the general exemption for paid and reimbursed expenses, which replaced the old dispensation regime. This exemption covers business expenses, such a travel, business entertainment, business phone calls and suchlike, which would be tax-deductible if met by the employee.
What value to report
Unless the benefit has been made available via an optional remuneration arrangement (such as a salary sacrifice or flexible benefits arrangement or if a cash alternative has been offered instead), the value of the benefit is its cash equivalent value.
New valuation rules apply from 6 April 2017 (subject to transitional rules for arrangements in place on 5 April 2017) where benefits are provided under optional remuneration arrangements, unless the benefit is one of a limited range of benefits (employer supported childcare and childcare vouchers, pension contributions and pension advice, cycles and equipment provided under a cycle to work scheme or low emissions (75g/km or less). Where the valuation rules apply, the value of the benefit is the salary foregone or cash alternative offered where this is higher than the normal cash equivalent value.
Filing the returns
There are various submission options available and HMRC offer a number of online options, including their online end of year expenses and benefits service and PAYE Online for Employers. You can also use your commercial payroll software. Paper forms may also be submitted.
Returns must be submitted by 6 July 2018. Employees must be given a copy of their return by the same date. Class 1A National Insurance paid by 22 July 2018 where payment is made electronically, and by 19 July otherwise.