P11D and Online Filing - Overview and Setup
The law requires that at the end of each tax year an employer provides particulars of any expenses, benefits and facilities provided to:
- Each employee or director earning at a rate of £8,500 a year or more, and
- Each director earning at a rate of less than £8,500 a year, unless they are a full time working director with no material interest in the company, or a director of a charity or non-profit making concern.
The details must be provided to HMRC on form P11D. This is prepared by the employer for each employee/director and must be submitted before a date specified by HMRC.
For 2017/18 this date is 6th July 2018. The HMRC web site can provide additional information and guides. Additionally some benefits attract class 1A national insurance contributions payable by the employer. The employers declaration of Class 1A contributions is provided on form P11D(b).
The P11D function is designed to support employers by capturing likely P11D return data during the year and at times when transactions are naturally being entered into the system. The system then will automatically provide a P11D form and section 336 statements for each relevant employee or director, allow for easy review and online filing directly to the HMRC gateway.
Users can expect significant improvements in efficiency in dealing with this compliance issue. Expense accounts have been cross-referenced to appropriate P11D sections so that recording a transaction to that account and selecting an employee/director will prompt the system to include the information on preparing the P11D for the selected employee at the PAYE year-end. If an employee/director is not selected then the values will not be included.
Transactions can be amended later if it is decided a different situation applies. In some instances the P11D return requires that any amounts made good by the employee/director be shown separately from the cash equivalent benefit. This is picked up by the system in a similar way to the benefit transaction but recognising that the sign is opposite. When a custom is account is added then the user will be asked to select an appropriate P11D section reference if appropriate. Certain sections are not account driven as described above, but the principle of recording a transaction and selecting an employee/director to activate a P11D entry remains the same. Section-by-Section descriptions are given in an additional user guide. Note that access to the preparation and online filing routines is via the Payroll menu, but it is not necessary to be using the payroll for pay purposes.
If there are any aspects of P11Ds and the tax and national insurance consequences that you are unsure of, a discussion with your advisor is strongly advised.
Payrolling of benefits and expenses
Once registered with HMRC you may add the cash equivalent of the employees' benefits to their pay and then tax them through your payroll. HMRC will make sure the value of the benefit is not included in your employees' tax codes.
If you use the service you:
- won't need to use form P11D
- still need to work out the Class 1A National Insurance contributions on benefits and complete form P11D(b)
- You can exclude employees from payrolling once you are registered, but you will need to send a P11D to declare the non-payrolled benefits.
Once the tax year has started you will have to payroll the benefits for the whole of the tax year, or until you stop providing them.
More information is available from Payrolling Benefits
Government Gateway Credentials
For on-line filing a user will need a Government Gateway ID and password. If these credentials do not exist, register at www.gateway.gov.uk. Allow a minimum of two weeks to complete the process.
P11D and P11D(b) Forms
P11D - Return of expenses payments and benefits
A form must be returned for any employee/director that has relevant benefits. Currently the P11D form is made up of 14 sections each reporting a category of cash equivalent (taxable benefit). In summary these are: -
- Section A - Assets transferred such as cars, property, goods or other assets
- Section B - Payments made on behalf of employee/director
- Section C - Vouchers or credit cards, includes child care vouchers above a weekly value
- Section D - Living accommodation
- Section E - Mileage allowance and passenger payments not taxed at source
- Section F - Cars and car fuel
- Section G - Vans and van fuel
- Section H - Interest-free and low interest loans
- Section I - Private medical treatment or insurance
- Section J - Qualifying relocation expenses payments and benefits
- Section K - Services supplied to the employee/director
- Section L - Assets placed at the employee's/director's disposal
- Section M - Other Items
- Section N - Expense payments made to, or on behalf of, the employee
The system will produce both a printable copy of the return for each employee/director as well as filing the return directly to the HMRC gateway. The return will show any cash equivalent benefit under any relevant category.
P11d(b) - Return of class 1A national insurance contributions due
This form summarises the total benefits that are liable to Class 1A and shows the computation of the amount of the contributions to be paid by the employer. This will include any Class 1A due on payrolled benefits. There is an employers declaration section, where an appropriate officer confirms the details. The system will file the figures online.
Setting up to record information
To activate the tracking of expenses and benefits for P11D purposes it is necessary to switch the feature on. This prevents screens having unnecessary analysis boxes if P11D recording is not required.
Personnel P11D expenses and benefit tracking is activated via the Optional Features tab, under the Control menu.
Control - Organisation Profile - Optional Features
Tick the Personnel P11D Expenses and Benefit Tracking box. A prompt to switch on payroll may also be seen. Payroll will need to be activated even if it is not to be used for pay purposes.
Setting up Employees and Directors
Each P11D return is specific to a relevant employee or director. So when any transaction is being recorded and it is to have a P11D impact an employee/director must be selected at the time it is entered, or subsequently selected in an edit or review process.
Setting up an employee and/or director is done via the Payroll/People menus.
Payroll - Manage Employees - click the red + to add an Employee
People - Manage Personnel - click the red + to add an Employee
Note a payroll reference and national insurance number are required to be entered on the Payroll/Tax screens
Capturing information at the point of entering a transaction
Only select an employee/director if you wish the transaction to be included in a P11D return.
When an expense transaction is being entered, the Analysis Tab will present a drop down box, P11D Employee, from which the relevant employee/director is selected. Leave the default selection 'Not Applicable' if there is no P11D impact.
Usual transactions in which P11D data capture could be expected are:
- Expense Claim
- Mileage Claim
- Cash Expenses
- Bill Payment
- Vehicle allocation, allocating a company vehicle for private use by an employee/director
- Fixed asset disposal, If asset is being transferred to an employee/director below market value
- Asset allocation, allocating a company asset for private use by an employee/director
- Setting up a loan to an employee/director
Note that if a situation exists that on a particular transaction, part must be recorded for P11D purposes it will be necessary to enter the transaction as two separate transactions one with an employee/director selected to record the P11D element.
Relating accounts to P11D items
The basic principle is that an account is linked to a P11D section item. For example the account Subscriptions and Professional Fees is linked to the P11D Section M - subscriptions and fees (subject to class 1A national insurance). The result is that when a transaction is entered in the system and an employee/director is selected then that amount will be shown on the P11D return for that employee. The different P11D sections have different accounts linked to them and default links for standard accounts are maintained by the system. If you are not sure which accounts are linked, print the list of expense accounts in the chart of accounts. Those accounts linked to a section are indicated with a section letter in the P11D column.
Accounts - Print Account Listing - Expense
If an appropriate account does not exist then look at the list of system standard accounts, again those accounts linked to a section are indicated with a section letter in the P11D column.
Accounts - Add from Standard Accounts
If an account you require is not available in the current Chart of Accounts, or available from the standard list a custom account can be created.
Accounts - Add a Custom Account
The edit account details screen is presented.
- As the account will be active leave the Active box checked.
- Selecting Easy View option for an account will display the balance of the account on the business home page. Unselect to reverse. This is equivalent to clicking on the icon in the accounts display list and can be reversed in the same way.
- Name the account in Account Name, add a description if required in the Description box.
- Select the Account Type from the drop down box. If you are not sure as to the account type, seek guidance from your advisor.
- Select from drop-down list if the account being created is a Sub-Account Of an existing account. N.B. expense accounts will automatically be assigned to administration costs if no value for "Sub-Account Of" is specified.
- The TB Cross Reference field is used to relate to an alternative chart of accounts. You would not normally enter a value here unless your advisor has asked you to. This field is useful if your advisor has their own standard chart of accounts defined for generation of statutory year-end accounts.
- An Import Cross Reference can be entered here and is used in conjunction with the Bill upload process for importing supplier bill and credit note data if required/
Click the SUBMIT button to confirm the account.
If the account is an Expense account some other data items exist. You are strongly recommended that you consult your advisor before setting these parameters.
- A Default VAT rate may be selected
- A VAT recoverable flag can be set to non-recoverable.
- Set the P11D Classification from the list.
Not all P11D sections are dealt with in this way and the differences are described in a P11D section by section user guide.
Dealing with amounts made good (Contributions from Employees)
Where an employee/director makes a cash contribution either partially or in total to offset any particular expense, the amount is entered as a Receipt selecting as the expense account the original account as well as selecting the employee/director in the P11D Employee drop-down.
The reader may find the two additional P11D related guides highlighted below helpful.