If you choose to offer certain benefits to your employees, then you may incur additional Class 1 National Insurance (NI) liabilities which must be reported to HM Revenue & Customs (HMRC).
This applies to benefits known as ‘benefits in kind’ (BIKs), as they are effectively a salary increase for an employee.
Examples include:
- Private healthcare
- Living accommodation
- Some non-essential travel expenses
- Company cars
As an employer, you are responsible for reporting and paying additional NI Contributions (NICs) incurred on benefits in kind through the P11D form.
Do I need to file a P11D?
If you are an employer and provide taxable expenses or benefits in kind to employees, you must report it to HMRC.
You can either do this through your payroll (‘payrolling’) or online after the end of the tax year via a P11D form.
If you choose not to payroll BIKs and expenses, you’ll need to fill in and submit a P11D for each employee who has received taxable benefits.
Whichever method you choose to report expenses and benefits, you will also need to report the amount of Class 1A NICs that you owe through a P11D(b).
These are submitted either through your payroll software, if you have more than 500 employees, or through HMRC’s PAYE online service, if you have 500 employees or fewer.
When do I need to file?
A valid P11D and P11D(b) must be submitted by 6 July after the end of the relevant tax year.
You must pay any Class 1A National Insurance that you owe by 22 July of the same year.
Missing the P11D(b) deadline may result in a penalty of £100 per 50 employees per month that the form is late.
What needs to be included (or not)?
You must include all taxable benefits, which includes the majority of benefits of significant value, including private healthcare or a company car.
For certain business expenses, exemptions may apply depending on how you are reimbursing staff for these costs.
You must either pay back the employee’s actual costs or pay a ‘benchmark’ rate set by HMRC.
In these circumstances, exempt expenses include:
- Business travel
- Business entertainment expenses
- Credit cards used for business purposes
- Fees and subscriptions
- Uniforms
Certain benefits are classed as non-taxable or ‘trivial’, including:
- Refreshments or on-site meals
- A mobile phone
- Workplace parking
- Certain staff events such as Christmas parties, if they cost £150 or less per head and are open to all staff.
These do not need to be reported as they are not subject to additional tax.
What changes are coming up?
Filing and processing P11D and P11D(b) forms has created a significant administrative burden on both employers and HMRC.
To reduce this burden, the Government has announced that employers will be required to report and pay Income Tax and Class 1A National Insurance via their payroll software.
You will need to make sure that you have suitable software in place and that you keep accurate records to make submission as straightforward as possible.
For support with P11D submission, expenses and employee benefits, please contact our team today to discuss how we can help you.