With the upcoming changes to the P11D rules, employers must understand the implications for benefits provided to employees.
These benefits, known as benefits in kind (BIKs), are considered a salary increase and could incur additional Class 1 National Insurance (NI) liabilities. These must be reported to HM Revenue & Customs (HMRC).
Examples of BIKs include:
- Private healthcare
- Living accommodation
- Some non-essential travel expenses
- Company cars
Reporting requirements Employers must report and pay additional NI Contributions (NICs) on BIKs using the P11D form unless they opt for ‘payrolling’ to handle these expenses through their regular payroll. Regardless of the method, Class 1A NICs must also be reported using a P11D(b) form.
Filing deadlines
The deadline for submitting a P11D and P11D(b) is 6 July following the end of the tax year. Any Class 1A National Insurance due must be paid by 22 July of the same year.
Failing to meet the P11D(b) deadline can lead to a penalty of £100 per 50 employees for each month the form is late.
What to include in reports
Employers must include all taxable benefits in the reports. Most significant benefits, such as private healthcare and company cars, fall into this category.
For certain business expenses, however, exemptions are available. For example, business travel and uniforms are exempt from tax if they meet specific conditions set by HMRC.
Exempt and trivial benefits Some benefits are non-taxable or ‘trivial’ and do not require reporting. These include:
- Refreshments or on-site meals
- A mobile phone for work use
- Workplace parking
- Certain staff events, such as Christmas parties, if they cost £150 or less per head and are open to all employees
Upcoming changes to alleviate the administrative burden of filing and processing P11D and P11D(b) forms, the Government is transitioning the reporting and payment of Income Tax and Class 1A National Insurance to payroll software systems.
Employers will need to ensure they have the appropriate software in place and maintain accurate records to simplify the submission process.
For assistance with P11D submission, managing expenses, and employee benefits, please contact our team to see how we can help.
