What is a P11D? A guide for SMEs
In the modern world of employment, it’s common for businesses to attract and retain their employees using perks or benefits.
For benefits in kind — perks provided to an employee for free, but hold a momentary value — employers must report the services or goods received to HMRC. This allows the revenue service to accurately calculate your staff’s income tax code and National Insurance contributions.
All employers that give their employees such perks are required to fill out a P11D each year. In this article, we’ll answer the following questions about this process:
- What is a P11D? What is a P11D (b)? What benefits need to be included?
- Who needs to file a P11D?
- When do you need to file a P11D?
- Which expenses are exempt from a P11D?
- What are the punishments for filing a P11D late?
- How can an outsourced accountant help with your P11D submission?
What is a P11D? What is a P11D(b)?
The P11D is a form used to report benefits in kind received by your employees or directors, and covers perks received by their household or family members.
It can be submitted through the government’s PAYE online services, or through commercial accounting services such as Xero.
The most common expenses which are covered by a P11D form include:
- Private healthcare or health insurance
- Interest free loans e.g. season ticket for their commute
- Company cars
- Assets provided to the employee that are used for personal reasons e.g. a mobile phone or laptop
- Non-business travel or entertainment expenses
For a full list of the benefits which are covered by the P11D form, please visit the government website.
HMRC defines a ‘family member or household’ as the employee’s:
- spouse or civil partner
- children — including their spouses or civil partners
You must use a separate form for each employee or director, and that information given to HMRC must also be given to the member of staff in question.
As benefits in kind effectively increase an employee’s salary, there will be additional National Insurance A contributions to be made in that person’s name. These costs will be covered by the employer in most cases. It is worth informing employees that their tax code will likely change after you have reported their benefits, and they may be required to pay a higher rate of tax going forward.
A P11D(b) is a form that summarises the benefits a company has paid to its employees as a whole.
Who needs to file a P11D?
The responsibility to report benefits in kind falls on the employer. As such, the P11D must be submitted by named agents of the company, or their outsourced accounting provider.
When do you file a P11D?
The deadline for the P11D is on the 6th July, for the previous tax year. So for the tax year 2022/23, the P11D is due on the 6th July 2023. There are no exemptions, companies cannot request a specific filing date for the P11D regardless of their agreed tax year with HMRC.
For a reminder of this year’s upcoming tax deadlines, check out our 2023 finance calendar.
Which expenses are exempt from a P11D?
The following costs are generally exempt from the P11D form, and can instead be logged as expenses:
- Business travel e.g. fuel or train tickets to cover a specific professional journey
- Business entertainment expenses e.g. costs incurred while meeting a client
- Credit cards used for business purposes
- Fees and subscriptions e.g. software costs
For a full breakdown of expenses that can be deducted from your corporation tax, read our explainer article.
What are the punishments for filing a P11D late?
Should you miss the initial deadline of the 6th July, there is no need to panic straight away. HMRC gives a grace period until the 19th July for late submissions, however it is still advisable to aim for the initial deadline to avoid any unforeseen issues.
If your form isn’t with the revenue services by the 19th, you will incur financial penalties. Your company will be liable to pay £100 in fines for every month, or part month, per 50 employees. So for example, if you don’t pay until August, and have a company of 100 employees, you will be required to pay £400 in late fees.
If you still haven’t submitted your P11D form by November, HMRC will contact you with a reminder and a summary of the fines incurred by the company thus far.
Should the form contain inaccuracies, you may also face a penalty. If HMRC feels they have been provided incorrect information, they can choose to fine the company 30%, 70% or 100% of the National Insurance contributions required, depending on whether they consider the company acted carelessly, deliberately misled, or actively concealed its liabilities. If the inaccuracy is found to be a mistake, then no penalty will be charged.
How can an outsourced accountant help with your P11D?
To avoid such charges, businesses should engage an outsourced accounting firm to assist in their P11D reporting. Here’s how they could help:
Organising data to minimise risk
By regularly updating your accountant on the benefits and perks received by your company, they can ensure a robust data management and reporting system is implemented, minimising the chances of improper reporting, or unintentional inaccuracies.
Leveraging Intricate knowledge of tax legislation
Do most business owners actually know what qualifies as a benefit in kind? For example, while health insurance is covered by the P11D reporting, life insurance isn’t. Your accountant partner knows all the ins and outs, and can make sure you aren’t wasting time collating information that doesn’t matter.
Giving you peace of mind
Keeping up to date with deadlines can distract you from key business activities. With your accounting partner giving you regular updates, and asking for your input in good time, and only when required, frees you up to focus on driving revenue for your business.
At Pennyhills, we’re always one step ahead. If you want to lessen your workload, and make sure your business stays compliant with HMRC, get in touch about your P11D submission today.