As the end of the tax year approaches, we thought we’d remind you of the important changes made to the reporting of benefits under the P11D regime, so you can check your processes are in good shape.
The main changes took effect from the beginning of this tax year, 6 April 2016:
Before 6 April 2016, employers who reimbursed genuine business expenses had to report them on employees’ P11D forms, unless they received a reporting dispensation from HMRC. Dispensations were replaced by statutory exemptions at the beginning of the 2016/17 tax year. If you had a dispensations agreed between 6 April 2011 and 5 April 2016, you can continue to rely on these for up to five years after the date they were originally agreed.
Having said that, most expenses or benefits covered by dispensations should fall within the new exemptions. This means you no longer need to report them to HMRC or record them on P11D forms. These include:
Some expenses or benefits may be only partially exempt under the new statutory exemptions, so may still need to reported (fully or in part) on the P11D form.
As a reminder, to qualify for the exemptions your company must either:
You need to ensure you have “checking” systems in place if you are paying scale rates. To pay expenses at a special rate, you must apply to HMRC for an approval notice. For more information on paying expenses to employees please see our fact sheet.
You should check that your expenses policy has been updated to reflect these changes and communicated to staff.
Since 6 April 2016, benefits you provide to your employees (or a member of their family or household) will be exempt from income tax if they meet all the following conditions:
These changes simplify the reporting of expenses and benefits.
Employers now have the option to process benefits in kind through the payroll. As long as tax and National Insurance Contributions are also paid via the payroll there is no need to report these benefits on the year end P11D. This is an option that became available for the first time this tax year.
The types of benefits suitable for payrolling include company cars, private medical, taxable subscriptions and taxable fuel benefits.
There have been some changes to salary sacrifice arrangements which will prevent employees receiving nontaxable expense reimbursements, rather than taxable salary.
We recommend you seek a review if you have salary sacrifice arrangements in place for such items.
If you have company cars under this type of arrangement, please also see our article on changes to salary sacrifice car schemes.