P11D Forms: What are they and how are they submitted to HMRC?15/Jun/2022
On 6 April 2022 HMRC decommissioned its online end of year expenses and benefits service, the interactive PDF used by small businesses to submit P11Ds. While the deadline for reporting taxable benefits and expenses is 6 July 2022, it's never to early to implement an efficient filing procedure.
Even if you're not a former user of HMRC’s PDF option, you should review your P11D submission process and consider if there’s a better solution out there - whether that’s a software upgrade or perhaps handing the responsibility over to an outsourced team.
What is a P11D?
The P11D form is sent to HMRC by employers and reports any benefits in kind received by employees or directors in addition to their salary. The document is submitted annually and includes services or items that the company pays for such as private healthcare and company vehicles.
What is a benefit in kind?
A benefit in kind (BIK) is a non-cash benefit that companies provide their employees or directors. Sometimes referred to as 'fringe benefits', these items or services must be non-essential for the employee to perform their work. Benefits in kind hold a monetary value and employers must treat these as taxable income. While there are non-taxable BIKs the list is limited and most benefits in kind will be taxable.
A few examples of taxable benefits in kind
How do I submit P11D forms?
Although there is no requirement to file these forms online, paper returns will only be an option for employers who have a few returns to file.
What does that mean for the majority of business owners? You’ll submit the P11D form using HMRC’s PAYE online service or through a commercial payroll software.
- PAYE Online Service
If your business is moving from using the interactive PDF and submitting P11Ds for up to 500 employees, the transition to HMRC’s PAYE online service may be your best option.
Not only will you be able to send the P11D expenses and benefits returns by the submission deadline, the online service also offers more functionality and features such as the ability to check what is owed, pay bills, see payment history and provide company car details.
- Payroll Software
Since software must be used for payroll purposes, it makes sense that employers may wish to also use the same software to file P11Ds. If you’re making more than 500 submissions you must use payroll software.
It’s important to remember that not all payroll software will have the ability to manage P11Ds, be sure to investigate this with your current provider as they may be offering this feature in a product upgrade or consider if you'll need to invest in new compatible software.
What is Payrolling?
Payrolling is the process of taxing employee benefits and expenses through company payroll and is an alternative approach to filing annual P11D forms with HMRC. Employers looking to payroll taxable benefits must register them with HMRC before the start of the tax year.
Whilst there are benefits to using payrolling to manage employee benefits in kind such as the ease of paying tax, it’s not as simple as it seems.
When contemplating if payrolling is the best option for your business, consider the following:
- Similar to the registering deadline, if you decide to deregister from payrolling, you must do this by telling HMRC through their online service prior to the start of the tax year.
- The payroll software you use must be capable of managing the payrolling of benefits.
- Employees must be given written notification by 1 June explaining that you’re payrolling and how it will affect them.
- P11Ds are not required if all taxable benefits have been payrolled, but you are still required to keep a record of benefits you provide throughout the tax year and submit your employer declaration form known as the P11D(b) and the Class 1A National Insurance Contributions payments by 6 July after the end of the tax year.
- Benefit information has to be available for each pay period.
- You’ll need to calculate the taxable amount of the benefit in kind and recalculate it if there are changes such as an irregular pay period, change in benefit (i.e company car), or should an employee leave.
How can DSA help?
If you are unsure about what needs to be included on a P11D form, have been queried by HMRC on P11D forms you have previously submitted, or have incurred penalties for late filing it may be time to bring DSA Prospect on board.
Our professional team can undertake the preparation and submission of your P11Ds, making sure your forms are completed accurately and on time. We may also be able to make recommendations to make the process more efficient in future.
Please contact our team as soon as possible to discuss our services and how we can support the payroll function of your business.
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