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Is a P11D required for a director who is not an employee?

I have a client who has set up a company and is the sole director/shareholder. She is not an employee of the company and only receives dividends at the moment, however has made some expense claims for mileage and other small stationery/IT items. Are we required to complete a P11D?
Toni Mendelow

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By Anonymous
28th Nov 2007 11:47

Director's Loan Account
Hi Toni,

To complete a P11d I suspect you would first have to have registered the company for payroll. Would this mean late registration penalties (as well as for late P11d submission) for your client company?

If so, you might get round all this via the Director's Loan Account (always assuming that it is not overdrawn): suppose your director buys misc stationery worth say £100 for the company. So that's Debit stationery £100 Credit Director's Loan Account £100. Later (whenever), the company repays the director by cheque: so that's Dr DLA £100 Cr Bank £100. The net balance on the DLA is zero, and it's all kept off-P11d.

The mileage claims are a non P11d item anyway, so there's no need to bother about those. (Presumably, you are within the 40p mile / 25p mile limits for those).

If there's VAT involved then you will have to look whether any large purchase invoices are made out to the company or the director personally; for smaller purchase invoices that leave the purchaser unnamed take the view that the director was transacting on behalf of the company, so go ahead and claim the VAT. The DLA principles remain the same as above.

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28th Nov 2007 12:25

With regard to mileage . . .
Neil is surely correct (sorry, Jane) so long as the claim is within the Revenue limited ie. 40p/mile first 10k miles, 25p/mile thereafter.

Andrew's comments on the director's account use is something that seems to crop up every year, usually in June. Vigorous debating has taken place on either side in the past. Personally, unless there is a dispensation I recommend disclosure (disclosing too much seems less risky in this respect than disclosing too little).

As for the fining, the Revenue can limit fines to the amount of tax payable, so if the tax payable is zero, you might get let off.

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28th Nov 2007 12:37

yes
director - P11D - no brainer

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By NeilW
28th Nov 2007 11:28

Depends on the nature of reality
Mileage is a tax free exemption and doesn't even go on the P11D if it is under the relevant amounts per mile.

It depends whether the 'expense claims' made by the director are really expense claims or not. Are you sure it couldn't just be the director paying for stuff the company bought?

Of course if you can't say that the company bought the items and the director paid for them then I'm afraid you are going to have to do a P11D and list everything in the extensive 'Other' box they provide just to annoy us.

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28th Nov 2007 12:04

Yes you do.
Have been through this earlier in the year where the MD is not actually an employee but had taxable benefits. Bear in mind that any members of the Director's family or an employee's family who have use of any benefit also have to be declared on a P11d. (even though they are not employees)

In addition, remember that unless you have a dispensation NOT to report, then all payments have to be declared (i.e. mileage) even if it is within the HMRC limits. In other words you have to fill in loads of pieces of paper even though there is no tax to pay at the end of it either by the Director or the Company. Apply for a dispensation as soon as possible. In my experience you cannot put payments through a DLA and not report on the P11d f you don't have the dispensation.

Jane

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28th Nov 2007 12:26

Mileage
Sorry Jane, but I disagree with you re mileage. See Section 16.7 in Booklet 480 http://www.hmrc.gov.uk/guidance/480_chapter16.pdf it is only the excess mileage above the Revenue rates that has to be reported, dispensation or not.

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By Anonymous
28th Nov 2007 13:33

Chapter 5...
...of Booklet 480 contains the following advice:

"Purchases on employer’s behalf
Businesses are often run in such a way that employees make payments on their employer’s behalf. For example, an employee may buy stamps, stationary and items of equipment for the employer and be reimbursed the costs incurred from petty cash or by cheque. Such transactions are not providing the employee with either earnings or expenses because the employee has received no money of his own. Accordingly such reimbursements need not feature on the P11D."

Maybe you do not need to comlete a P11D after all.

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28th Nov 2007 14:08

Mileage within rates
I note the comment regarding mileage but am quoting from personal experience and the comments of two HMRC officers (in a face to face metting) and a letter sent to me at that time. According to HMRC Guide 480 Section 16.7 you do NOT have to report on P11d if you pay the exact HMRC rate. However, you have not specified whether your director is paid at HMRC rates and is using their own car or not.

Anyway, because other expenses were being paid (although not taxable) they DID have to be reported so we applied for the Dispensation and that got rid of the problem. Phew!

Jane

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By Anonymous
28th Nov 2007 14:09

Settling The Company's Debts
For those unable to take on board that a director (or for that matter a non-director employee - but let's not go there) who settles the company's debts personally is simply making a loan to the company, please read Neil's replies and rationale to the P11d quiz at:

http://www.accountingweb.co.uk/cgi-bin/item.cgi?id=140635

Makes no difference whether or not the company repays (repays because it is a loan; not reimburses) the director. If not then it sits in the DLA account for ever and a day as a creditor. If so then it's an entirely unrelated transaction whereby the director draws funds from his loan account. Either way it's non P11d reportable. Any dissenters please read the very succinct http://www.hmrc.gov.uk/employers/ebik/ebik2/loan-account-02.htm followed by the example Director's Loan Account at http://www.hmrc.gov.uk/manuals/nimmanual/nim12016.htm whereupon all will become clear.

BTW I'm not sure whether Nick's comment (in the Quiz link above) that office supplies are non P11d reportable (Nick cites P82 of "Employer's Further Guide To PAYE") is correct or not: I read that as stationery benefits being exempt, not necessarily stationery expenses. Anyone like to venture their interpretation? ie regardless of anything else, should we be reporting stationery and office equipment reimbursements of expenses on P11d at all?

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28th Nov 2007 22:44

Thank you all for the very useful comments. I thought this seemed a bit of grey area and it seems like it is.
The mileage is at HMRC rates so it would seem from all the comments that we are ok having no P11D on this one.
As for the expenses it is mainly stationery and stamps and I agree that it is reasonable that the director has settled the company's debts and therefore made a loan to the company. In addition there is the point that director has received no benefit/money of his own, and it seems questionable that such office supplies should be going on the P11D in any case.
Guess I could tell the client to either get the company to pay the bills going forward and use petty cash for small items to avoid potential problem.

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By neileg
29th Nov 2007 15:24

Office holder
PAYE regulations apply to employees and officeholders. A director is an officeholder so is subject to the rules regarding P11ds whether they receive a salary or not.

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By Anonymous
29th Nov 2007 17:16

How do you set up a PAYE scheme where there are no salary paymen
These days, they will only set up a PAYE scheme 30 days before the first salary is to be paid. Short of lying to them about the payment date, how are we now supposed to set up a PAYE scheme for situations like this one (and I do have a few clients in a similar situation)?

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By wowee
06th Jul 2011 11:21

Does anyone have a definative answer to this ?

Once again,  P11D deadline comes around and this becomes an issue/question.

I have a client company which has 2 directors, one of whom is not an employee.  He bought 20 quids worth of stamps for the company at xmas,  and was re-imbursed as an expense payment - internet banking transaction paid to his personal account (company doesn't operate petty cash unfortunately).  That was his only financial transaction with the company in a year.

So for 'safety's sake',  we have created him as an employee so that we can submit a P11D declaring that amount.  The process probably cost us more than the actual transaction in the first place !!

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24th Mar 2013 18:42
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