P11Ds (Benefits-in-Kind) – an outline

The P11D season is upon us once again…

The P11D is a statutory form required by HMRC from UK based employers detailing the cash equivalents of benefits and expenses that they have provided during the tax year to their directors, and employees earning more than £8,500 per year (including benefits).

Cash equivalent means the cash value an employee will pay tax on according to the type of benefit they have been provided by their employer.

The basic cash equivalent formula is: –

Cost to the Employer of providing the benefit (inc VAT)
Amount made good by the employee (Out of their net pay)
the Cash Equivalent

However there are some very complicated rules to calculate the cash equivalents for certain benefits such as company cars, beneficial loans, provision of living accommodation etc.

Here are some examples of what should be included on your P11D:

–        All expenses reimbursed to you by the company for business expenses incurred for you personally, whether or not you physically withdraw the cash or not.

–        All business expenses the company meets on your behalf. Common examples of the company paying for genuine business expenses for you personally would be entertaining, subsistence, etc.

–        All personal expenses the company meets on your behalf

–        Company car benefits must also go on your P11D, and these will attract a tax and Class1NIC liability. It is often better to keep your own car personally and charge the company mileage instead.

It is possible to apply for a P11D dispensation whereby you agree to adhere to certain rules, and, if accepted by HMRC, this precludes the need to do P11D’s from the date the dispensation is agreed. This is obviously a great time saver, and means that HMRC are made aware of the types of expenses you have in your business, and that these are for business only.

P11Ds (for the year to 5 April 2013) need to be completed and submitted to HMRC by 6 July 2013. Any Class 1A NICs due as a result of P11D benefits must be paid by 19 July (22 July if paid electronically).  By this date the employer must also provide current employees with details of the information contained on the P11D.

This article was compiled by Karen Ashton, Client Manager at Balance Accountants.

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