Essential Guide to P11D Forms: Understanding their purpose, what needs to be included, and how to submit them to HMRC

For business owners, one of the most critical points in the year is tax submission time. It can be a big flurry of stress – getting paperwork in line, ticking off boxes, and determining what kind of tax you need to pay. If you don’t submit the correct tax paperwork to HMRC in time, you’ll probably be hit with a hefty fine. And a significant form in that tax paperwork is the P11D. In this article, you’ll learn what a P11D form is, if you need to submit one, what its purpose is, what does and doesn’t need to be included, and how to report it.

What is a P11D form?

Essentially, P11D forms are a record of the non-monetary perks that employees or directors receive during the tax year. They don’t include salary sacrifice schemes – these perks must be above the employee’s salary to be relevant to P11D reporting. These forms are required by HMRC, to determine what (if any) additional tax needs to be paid – either by the employee or the employer. It’s important to note that P11D forms must be completed by the employer, listing every taxable benefit and expenses that each employee or director received.

What benefits are included in a P11D?

HMRC calls these perks ‘benefits in kind’, and they’re the extras that employees get on top of their salary. This includes things like company cars and interest-free loans over £10,000, but there are plenty more. If you’re unsure on a certain perk, it’s best to check back to what HMRC considers a taxable expense or benefit. These are some of the common benefits that are included in a P11D:

• Company car
• Company rail season tickets
• Health insurance
• Interest-free or low-interest loans
• Gym memberships
• Childcare if it exceeds statutory limits
• Accommodation provided unless it’s necessary for work
• Non-business travel and entertainment expenses

What sort of benefits are exempt from a P11D form?

There are some common misconceptions between a generic company perk and a ‘benefits in kind’. And if a perk or expense is deducted from the employee or director’s salary, it is not relevant to the P11D form. Here are some of the mistakeable benefits that are exempt from a P11D form:

• Generally, ‘trivial’ benefits that cost under £50
• Business travel expenses (including transport and accommodation)
• Hire cars and related fuel costs
• Cycle to work scheme (if it’s a salary sacrifice)
• Business-related meals, drinks, and entertainment
• Fees and subscriptions

What additional tax is paid when submitting a P11D form?

A P11D form determines whether the employee needs to pay tax on their ‘benefits in kind’ and can sometimes change their tax code, but employers can pay tax on these benefits through payroll – this is called ‘payrolling benefits’. If that’s the case, then you don’t need to submit the form for the employee. However, you’ll still owe Class1a National Insurance for those perks. You’ll need to list the ‘benefits in kind’ on a P11D(b) to pay that additional Class1a National Insurance (NICs) tax. A P11D(b) summarises the employee’s individual forms. This employer tax for 2023/24 is calculated at a rate of 13.8% of the ‘benefits in kind’ total value.

When is the P11D deadline?

The UK tax year runs from 6^th April to the 5^th April the following year. The deadline dates dependent on the kind of form. It’s a little bit confusing, but the deadline for submitting P11D forms is 6^th July, after the tax year has ended. For example, this current year will run from 6^th April 2023 until 5^th April 2024. The P11D deadline for this tax year is 6^th July 2024.

If you file incorrectly or late, HMRC will be ready and waiting to hit you with a penalty. They’re actually slightly more lenient with P11D forms – if you miss the deadline date of 6^th July, they give you around two weeks to set it right. But if 19^th July comes and there is still no P11D to be seen, your company will incur a fee of £100 per month for every 50 employees in the company. And if you still haven’t filed it by November, they will send you a reminder – as well as a bill for all the fines you’ve racked up in those months. If your P11D is incorrect, HMRC will determine if it was a genuine mistake or if they believe you purposely omitted information. If they think you deserve a fine, they’ll issue penalties of 30%, 70%, or 100% of the tax owed.

How to report on P11D forms

After determining what does and doesn’t need to be included on the P11D form, it’s crucial that it’s reported properly. You must submit a P11D report to HMRC for each employee that has received taxable ‘benefits in kind’ that are not reflected in their payroll. There are some particular ways to report expenses on P11D forms that might catch you out. Be sure to research exactly how to calculate the value of these benefits to avoid getting a penalty. Here are a couple of examples:

• Interest-free loans: Directors often receive loans from companies to pay for things like rail season tickets – these are called director’s loans accounts. If that loan is more than £10,000 (all spent within the tax year), the relevant director will need to pay interest or report the loan as a benefit on a P11D.
• Company cars: The value of a company car is dependent on the listed price of the vehicle (including VAT) and its CO2 emissions.

Filling out the P11D form might seem complex and time consuming, but it’s an essential aspect of the UK tax system. It ensures that there is total transparency around workplace benefits, as well keeping employee’s and employer’s tax payments correct. It’s a vital task, so don’t take it lightly – speak to the Payroll manager at Finerva for straightforward advice and planning services.