Hear from Simon Wright, activpayroll's Compliance and Audit Manager, who specialises in P11Ds, Employment Related Securities and PAYE settlement agreements as he guides you though the complexities of P11D filings.

It is a legal requirement for businesses to submit taxable benefit information to HMRC, and this can be done in two ways. You can either register with HMRC, and tax your benefits through the payroll as part of each payroll cycle, or by submitting forms P11D for each employee who received a taxable benefit in the tax year. Preparing and submitting forms P11D is a service we offer customers here at activpayroll.

The P11D form is used by employers to report details of their employees' taxable benefits to HMRC. The P11Ds must be submitted to HMRC by 6th July each year, and the return must include a P11D(b) summary showing the total of all the taxable benefits that have been included on forms P11D, or which have been taxed through the payroll in the tax year.

Why is P11D Reporting Important?

P11D reporting is important because it helps you to ensure that your employees are paying the correct amount of tax on their benefits. It also helps you to stay in line with HMRC guidelines, so that they don't penalise your business for non-compliance.

What is Included in P11D Reporting?

P11D reporting is a way for you to report your benefits and expenses, as well as items subject to Class 1A National Insurance contributions. This includes benefits such as medical benefit, company cars or accommodation provided by your employer.

What are Employment Related Securities?

Employment related securities (ERS) are shares or other securities that are acquired by reason of employment. These securities are usually acquired through an employee share scheme but can also be acquired through other arrangements such as options, restricted stock units, and convertible bonds.

Employers must register their share schemes with HMRC and must also submit an employment-related securities return (ERS return) to HMRC each year. The ERS return includes details of any ERS that have been acquired by the employee and must be submitted by the same deadline as the P11D form. Activpayroll can assist with the preparation of your ERS return.

What is PAYE Settlement Agreement (PSA)?

A PAYE Settlement Agreement (PSA) allows you to make one annual payment to cover all the tax and National Insurance due on minor, irregular or impracticable expenses or benefits for your employees.

If you get a PSA for these items you will not need to:

  • put them through your payroll to work out tax and National Insurance.
  • include them in your end-of-year P11D forms.
  • pay Class 1A National Insurance on them at the end of the tax year (you pay Class 1B National Insurance as part of your PSA instead).

These benefits and expenses can include things like staff parties or gifts, and travel and subsistence expenses that exceed HMRC's limits.

Common Mistakes to Avoid When Completing a P11D Form

There are several common mistakes that people make when completing their P11D forms:

  • Incorrectly calculating taxable amounts: If you do not correctly calculate your taxable benefits, it could result in an overpayment or underpayment of tax or even a penalty.
  • Failing to include taxable benefits: If you don't include all the necessary taxable benefits on your P11D forms then you may be underpaying tax.
  • In-house skills gap: You do not have the right capability or resource in-house, which can result in accuracy and filing problems, often outsourcing your P11D reporting requirements to a specialist result in accurate filing.

The Consequences of Failing to File a P11D(b) Form

The consequences of failing to file a P11D(b) return (including P11Ds or details of benefits taxed through the payroll) are as follows:

  • HMRC will charge an automatic penalty of £100 for each 50 employees for each full month that the return is late.
  • If you didn’t pay the NIC due by 22 August (e.g. 30 days after the due date), HMRC will add a 5% penalty to the amount of NIC due. This penalty rises to 10% after 6 months, and 15% after 12 months and, of course, HMRC will always charge interest on late payment of any tax.
  • HMRC can also request that a penalty of £300 per P11D submitted late is charged, but this must be done through the First-tier Tax Tribunal (FTT). If the FTT agrees to issue such penalties, a further £60 per day can be charged until the employer puts things right.

My Tips for Filing Your P11D Forms on Time

  • Start early. If you're a business owner, the best thing you can do is start filing your P11D forms on time and in full. You'll avoid penalties and fines by getting into the habit of filing early, and it will save you from having to scramble at the last minute when it comes time for an audit or tax return filing.
  • Create a filing system for yourself and your employees so that everyone knows what needs to be done when it comes time for P11D reporting season. This will help prevent confusion later down the line when everyone's busy trying to get their work done while also keeping track of their own personal finances as well as those of their company!

Why activpayroll is the right partner for you!

activpayroll has over 20 years’ experience in preparing P11Ds and P11D(b) submissions, and can assist in collating your benefit information, providing advice on which benefits should be reported to HMRC and responding to employee queries. We have software available which allows us to prepare the forms for you in PDF format, and to make electronic submissions to HMRC. We work in partnership with our clients to assist in ensuring your business is fully compliant with their year-end reporting obligations.

In addition to this, we can assist in advising if a PSA would be appropriate for your business, submit an application to HMRC to put an agreement in place, and can assist with the annual submissions once your agreement has been approved.

We also assist in the preparation of Employment Related Securities (ERS) returns where you have registered an ERS scheme with HMRC. You must submit an ERS return for each registered ERS scheme every year until you cease the scheme, even if there is no reportable event.

The importance of year end reporting is clear. It allows businesses to remain fully compliant with HMRC regulations and can allow them to make more informed decisions about their employees.

If you're a business owner or manager and need support with your P11D forms, PSA application or submission or assisting in the preparation of your ERS reporting contact us here, selecting P11D enquiry on the form.

Thanks for reading, Simon

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