Just to check:
Limited company has paid travel expenses to sole director. These are entered into P11D in Section N, "Travelling and subsistence payments". A taxable payment results.
However, all of the travel expenses were incurred wholly and exclusively for the business, so the director should not suffer tax.
The director includes the taxable payment in his self assessment tax return, and also includes the same amount as a business expense, thus no tax to pay.
Or should an entry go in the "Amount made good or from which tax deducted" box on the P11D so that no taxable payment is shown in the first place... I don't think so, but just want to check as I have a whole batch of these to do and want to get it right first time!
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P11D
I might be wrong as I do not specialise in PAYE, but if the director is claiming specific travel expenses, with receipts that are w&e for business then should this not be treated as any other employee? I.e claimed through an expenses sheet for petty cash / reimbursement at end of month?
The only time I have seen travel and sub entered on a P11D is where a general monthly allowance is claimed.
Would be good to hear others opinions!
It goes in the SA return. It does not go on the P11d.
You use the made good etc box only when the director has actually paid something back to the company, say a contribution towards private medical insurance, or where PAYE has been applied on part or all of the amount, perhaps because it is a settlement of a pecuniary liability
Goes on P11D
It should be entered on the P11D.
Nothing goes in the "amount made good or from which tax deducted" box.
It goes on the SA tax return as a payment and as an expense.
I have had an email from the OTS where they explained that they recommended improvements to P11Ds and the expenses you have had problems with are exactly one of the recommendations. As it is done now is a complete nonsense and open to problems. Sometimes HMRC adjusts tax codes because of the P11D entries that should not make any difference to tax.
It is a nonsense ....
and I am inclined to put the double entry on the P11D simply to avoid the problem of tax codes being changed for no good reason. Because there is a time lag before P11D's are processed I have found tax codes increased in response to the job expenses recorded on the SA return.
I appreciate this is not correct, however, at least a P11D has been completed and the process is transparent come PAYE inspection. Either that or ignore the whole thing ... never even seen it commented on in a PAYE inspection in the last 12 years!
P11D & coding notices
and I am inclined to put the double entry on the P11D simply to avoid the problem of tax codes being changed for no good reason. Because there is a time lag before P11D's are processed I have found tax codes increased in response to the job expenses recorded on the SA return.
I appreciate this is not correct, however, at least a P11D has been completed and the process is transparent come PAYE inspection. Either that or ignore the whole thing ... never even seen it commented on in a PAYE inspection in the last 12 years!
Indeed. I recently submitted a P11D with entries in "travelling and subsistence", "entertainment" and "other expenses". I left "amounts made good" blank. HMRC promptly processed the P11D and issued a new coding notice with only the amounts in "other expenses" as a BIK, reducing the tax-free amount for the employee concerned. But if it was a BIK, I wouldn't have entered it into Box N of the P11D, it would be in Box M and Class 1A NIC would be due. Pretty annoying that HMRC can't decide how a P11D is actually suppose to work.
@BKD
You're right of course, but how many dispensations have you done for 1 director companies? And how much do you charge for that exactly?
Dispensations
You're right of course, but how many dispensations have you done for 1 director companies? And how much do you charge for that exactly?
1) A great many; and
2) Not very much (usually about the same as preparing a P11D without the dispensation)
Dispensations make very little difference
You still have to review the accounts data to see if there are any transactions not covered by a dispensation.
I'm not going to go over old ground again, but ....
Dispensations work very well for some people, less so for others. Used properly, they can make a very big difference.
In the context of a sole director company (as with any other company) the dispensation sets out clearly what type of expenditure is covered by the dispensation (eg travel and subsistence costs). It is very easy to keep track of such expenditure. If the accountant feels that he cannot trust his client to get it right, and considers it necessary still to review each and every transaction, that says more about the nature of the client and his record-keeping (and relationship with his adviser) than it does about the effectiveness of a dispensation.
Dispensations certainly aren't for everyone, but in my experience (which is clearly different to that of others) they can be of significant benefit to both client and adviser.
I've nothing more to say on this particular topic.
Don't use dispensations
I feel that it is better not to apply for a dispensation. Without a dispensation you just disclose expenses in “Section M” and the tax treatment becomes a personal matter between the employee and HMRC. With a dispensation the employer bears the risk that there was not proper disclosure when the dispensation was applied for or that things have changed since the dispensation was applied for. Full disclosure is quite easy and forces HMRC to bear some of the burden of this annual ritual.
Accountants shouldn't close their eyes too often
"If the accountant feels that he cannot trust his client to get it right, and considers it necessary still to review each and every transaction, that says more about the nature of the client and his record-keeping (and relationship with his adviser) than it does about the effectiveness of a dispensation."
There's always the danger that some accountants prefer to close their eyes to reality. Hopefully, these accountants will not have their clients challenge them if they get it wrong. Whether their clients will be impressed with an accountant who washes their hands of any responsibility regarding P11Ds is another matter.
Horse's mouth
HMRC say:
If it is not possible for you to operate an independent system for checking and authorising expenses claims - for example, because you are the sole director of your company and you have no other employees - you will only be able to obtain a dispensation if you:ensure all expenses claims are supported by receipts for the expendituredemonstrate that the claim relates to expenditure that can be covered by a dispensation - your receipts may be sufficient for this purpose, but if not you must retain additional information
That being the case, it seems like you would need to do similar checks whether or not a dispensation is in place....
What I do ...
... is put them in section N, then produce a s336 claim for the director to sign saying incurred in the course of his duties and send that to his tax offfice - job done.
IRIS does all this for us, there is a check box to tick if for business purposes in the P11D module, which automail picks up to drop the relevent expenses in to the s336 template.
Very occasionally HMRC try to code these out, but a quick phone call rectifies this.
When the SA Return is done IRIS picks up the P11d info and drops it in the relevent boxes and makes the appropriate claims.
Of course, if the director has a business credit card would this not absolve the need for this paper trail farce?
Quick?
"Very occasionally HMRC try to code these out, but a quick phone call rectifies this."
Is there such a thing as a quick phone call to HMRC?
Quick
I would say it takes two quick calls. One to speak to a moron, and one to call back somebody who knows what they are doing. Quick calls, apart from the (apparently 29 minute average) waiting time for them to pick up.....
If it is an individuals PAYE code ...
... rather than a company PAYE issue, which this is - I call the SA number!
Nothing more?
"I can recall only one instance of HMRC picking up on a P11D error in respect of one of our clients during an Employer Compliance Review. It is true that such Reviews do not indicate that the returns are 100% complete and accurate. Nevertheless, if HMRC are happy with the quality of my clients' record-keeping and procedures, and are satisfied that the returns are complete and accurate, then so am I."
That's a bit worrying. HMRC usually are usually only concerned about any loss of revenue. I would hope that most accountants prefer to get things right.
"If other advisers are less confident about the competence of their clients, then they need to adopt whatever procedures are required in order to satisfy themselves that their clients' returns are correct."
I would think it's advisable that accountants don't rely on the "my clients never make mistakes" defence rather than doing their job properly.
Didn't you say this: "I've nothing more to say on this particular topic." Should we rely on what you say or not?
Risks
HMRC usually are usually only concerned about any loss of revenue. I would hope that most accountants prefer to get things right.
Quite correct. But, what is the main risk as far as P11Ds are concerned? It's the omission or understatement of reportable benefits. I'm not saying that it can't, or doesn't, happen but the risk of including on a P11D something that shouldn't be there is considerably lower than that of leaving out something that ought to be included. Again, if HMRC are satisfied that our clients' record-keeping and procedures are such that benefits have not been understated then so am I (which, to avoid any doubt, is not to say that we rely on HMRC to check the accuracy of returns for us). I'm equally confident that our procedures would identify any extraneous benefits. If some accountants are so [***] that they feel the need to check and cross-check every single transaction to ensure that their clients' returns are correct to the penny, all well and good. I prefer to get on with more productive matters.
I would think it's advisable that accountants don't rely on the "my clients never make mistakes" defence rather than doing their job properly.
Something we agree on
I find it quite bizarre that anybody would suggest that all their clients submit the figures to be reported without carrying out any checks at all.
Again, I agree 100%
SA/PAYE
I would have thought that SA would have to tell PAYE about the code. Therefore, I can see why you phone SA.
Sparkler is right
P11Ds are not so much about payments but more about "consumption". You consume travel, hotels, telephones, etc. HMRC, after being quiet on the subject for years, has recently admitted that payments as an agent of the employer don't need to go on P11Ds.
I've had plenty of contradictory advice from HMRC staff and other accountants. It's not easy to understand P11Ds so I find it quite bizarre that anybody would suggest that all their clients submit the figures to be reported without carrying out any checks at all.
Accounts v P11Ds
With accounts you would get 10 different sets of accounts if prepared by 10 accountants because opinion and materiality is relevant.
With P11Ds opinion and materiality isn't relevant.
Similarly with other payroll matters, when you submit P35s and P14s and prepare P60s do you say that they are materially correct or precise?
You may see it as being [***] but accountants who take pride in their work prefer to get things right than wrong.
Blundering along and hit and miss attitudes have no place in accountancy.
We don't need to be serious all the time. What does the following sentence mean to you?: "I've nothing more to say on this particular topic."
Yes, that's what I thought it meant!
Precision and accuracy - two different concepts
With P11Ds opinion and materiality isn't relevant
Really? You may want to look at EIM21860 for starters
when you submit P35s and P14s and prepare P60s do you say that they are materially correct or precise?
Neither
accountants who take pride in their work prefer to get things right than wrong.
Agreed - but define "right" and "wrong" - in the context of providing the client with the best service, rather than worrying about whether a £2.99 benefit has been omitted from a P11D.
Blundering along and hit and miss attitudes have no place in accountancy.
We continue to find some common ground
Who has more knowledge?
"Agreed - but define "right" and "wrong" - in the context of providing the client with the best service, rather than worrying about whether a £2.99 benefit has been omitted from a P11D."
How do you know what has been omitted unless you review the data? You can't ignore £2.99 because there may be 100s of such amounts. You seem to be saying that you don't have to do any work other than enter the figures that the clients give you because you think they know everything about P11Ds.
I don't know how you would collect data for a P11D. From what you say it would appear that your boss tells you to ask clients for the numbers. One client interrogates their accounts and runs a report. Other clients use a mixture of accounting reports and expense claims. If I do the collecting of data I usually sort and analyse spreadsheets or do something similar to what other clients do. Whatever my clients do I always ensure it is reasonable by reviewing the data. I think I know P11Ds better than my clients but I accept that a very small number of accountants may think that their clients know more about P11Ds than they do.
Don't fall in love with your clients. Keep a professional distance.
.
How do you know what has been omitted unless you review the data?
Where did I say I don't review the data?
You seem to be saying that you don't have to do any work other than enter the figures that the clients give you because you think they know everything about P11Ds.
That's a rather bizarre (and quite incorrect) interpretation/extrapolation of what I've said so far
I don't know how you would collect data for a P11D.
Enough said, really
From what you say it would appear that your boss tells you to ask clients for the numbers.
Again - a rather odd extrapolation
I accept that a very small number of accountants may think that their clients know more about P11Ds than they do.
You may be right, but I haven't met any yet. However, I have met several accountants that trust their clients to provide them with the information that they've asked for - sufficient trust, combined with proper risk analysis and review procedures, that means they don't feel the need to examine each and every transaction. However, I accept that there may be a very small number of accountants that don't have sufficient trust in their clients and procedures in place so that they need to spend time scrutinising every line in the client's ledgers to ensure that every last penny of reportable benefit is included.
Here
"Where did I say I don't review the data?"
You must have forgotten what you said on this thread:
I asked: “How do you obtain the information to submit P11Ds?”
Your answer was: “Easy - I ask the client for it. Sometimes it arrives by email, sometimes by fax, sometimes by post. That is how I obtain it.”
“Our clients are left in no doubt that all responsibility for providing us with all relevant information, and checking the accuracy of the forms, rests with them.”
“Yes I am relying on the client to provide me with details of expenses not covered by dispensation. Just because you are unable to trust your clients with such a simple exercise doesn't mean that the rest of us don't trust our clients. Once the client knows which expenses are covered by the dispensation, it's a relatively straightforward exercise to keep track of them (and, conversely, those expenses not covered).”
“Once the client knows what is covered, he can keep track of them and exclude them when reporting.”
Where
And where exactly, in either the text quoted above or elsewhere, have I said that we don't review the data?
But I'm beginning to see where the problem lies - you have a propensity to either misunderstand basic written English or, worse, to deliberately twist or misconstrue it.
I am going by what you say
What you said makes it obvious that you don't review the data. If the client sends you the figures to go on the P11D you wouldn't know if they had omitted £'000's from the P11D because you don't look at the accounting data. You only go by what the figures the client gives you.
It is not me misunderstanding, twisting or misconstruing what you said. It would appear to be you have said one thing, ie. you ask the client for the figures to go on the P11D but now you are not willing to admit that you don't review the accounting records to ensure the figures provided for the P11D are complete or even put you on enquiry about any failings.
It's pretty clear from what you said that your clients could miss out certain benefits and expenses from the P11D data they give you and you simply wouldn't know, or, it seems, even care. Being critical of me for pointing out failure's in your firms policy for submitting P11Ds does yourself no credit. I would recommend that your firm considers improvements in the way they collect information for completing P11Ds.
I'm surprised that you are even posting on this P11D thread after your announcement earlier.
Advice?
Where did I say that we don't look at accounting data? Where did I say we only go by the figures our clients give us? You have extrapolated (misconstrued) my limited responses in a mischevious manner.
You have no idea of the risk analysis and review procedures that our firm has in place. Since, in this exchange, I alone know what those procedures etc are, I and I alone am in the position to determine whether you have or have not miscontrued my words - and you have. Your analysis of what I have said, and the insinuation that P11Ds prepared by our firm may be incorrect - and that we don't care about the accuracy of the returns, is so wide of the mark as to be little short of an insult. Retract it or apologise - or expect the comments to be reported.
We are happy with the accuracy of the returns - and have been for years, our clients are happy with the accuracy of the returns - and have been for years and HMRC are happy with the accuracy of the returns - and have been for years. Do you think I care one jot that you are not happy with the accuracy of the returns? And do you really think that I am going to take advice on the completion of P11D returns from someone that seems to think he knows all about what is required yet comes out with a comment like "With P11Ds opinion and materiality isn't relevant"?
Here we go again
"Where did I say that we don't look at accounting data? Where did I say we only go by the figures our clients give us? You have extrapolated (misconstrued) my limited responses in a mischevious manner."
You didn't specifically say that you didn't look at accounting data but when I asked you how you obtained the information to prepare you definitely said plenty that indicated that you didn't look at accounting data. If you have changed your story that is good news.
"Retract it or apologise - or expect the comments to be reported."
You have retracted what you said. I simply went by what you said. I see no reason to apologise.
You tried to hijack the thread when at 12.08 yesterday you said: "If the accountant feels that he cannot trust his client to get it right, and considers it necessary still to review each and every transaction, that says more about the nature of the client and his record-keeping (and relationship with his adviser)". This is clearly an attempt to insult. I am not interested in bothering Henry by complaining to him. It is your decision if you want to complain to Henry when you are clearly the person wishing to cause trouble. You have made conflicting statements on two different threads which seem to be produced solely by a desire to argue.
If you now say that you DO look at accounting data when preparing P11Ds then I am in full agreement with the policy of your employer.
George, the provider of crushing put downs
That must be the most intelligent comment you've made all year!
So, George, do you think an accountant should expect clients to provide the numbers to go on a P11D without providing the accounting data or do you think you should review the accounting data to ensure they appear to understand what is required?
Peter, since you ask...
... as far as possible, clients should be trained to do these things themselves. Spoonfeeding people does little for their development.
Whether they do it themselves or provide the information to the accountant, there should be a system for collating that information (and passing it to the accountant, or processing it on to P11Ds and submitting them on time). The system should be be assessed for its adequacy, and where it's considered adequate be relied upon. Periodic reviews involving compliance testing should then be carried out to ensure the system is continuing to function properly.
Carrying out massive amounts of substantive testing is itself prone to error and doesn't solve the underlying problem of a poor system, in my view.
As I understand the debate, both BKD and yourself are mindful of the risks involved and have made different assessments of your clients' systems.
If one group of clients is coming out of that assessment as appearing lacsadaisical in their approach, it's probably a result of inadequate training.
Well said, George
Whether they do it themselves or provide the information to the accountant, there should be a system for collating that information (and passing it to the accountant, or processing it on to P11Ds and submitting them on time). The system should be be assessed for its adequacy, and where it's considered adequate be relied upon. Periodic reviews involving compliance testing should then be carried out to ensure the system is continuing to function properly.
Exactly the point I was trying (and clearly failing) to get across.
A system that relies only on the examination of accounting data - whether 100% or by sample review - is liable to result in omission of substantial benefits, and possible inclusion of non-taxable items.
But we've heard that materiality and opinion have no place in the preparation of P11Ds. If that were the case, it would indeed require a detailed examination of every single transaction, along with other procedures, to ensure that the returns are 100% correct. How else can the accountant that takes pride in his work ensure that the returns are absolutely correct, to the penny? But of course, to suggest that materiality and opinion are irrelevant as far as P11Ds are concerned is utter nonsense.
It depends
Some clients can be taught but others can't.
I'm more than happy to let the clients who are willing to learn about P11Ds to do their own. In this case I think it's important to teach them what to look out for. Given that it's a once a year thing it's harder to learn from experience. I would always want to review accounting data to see that the P11Ds appear reasonable. BKD seems to think that means poring over every document in great detail but it doesn't in my case.
It is easier to prepare P11Ds for clients who provide accounting data in the form of spreadsheets than bookkeeping software when the employer is VAT registered. This is because sorting a spreadsheet on the expenditure classification and totalling the gross payment is easier than extracting the information from some bookkeeping packages although some bookkeeping packages allow the necessary reports to be run.
If clients want to be responsible for producing their own P11Ds and they think their knowledge is equal or superior to their accountants then I don't see why they bother with getting their accountants involved.
Other clients don't want anything to do with P11Ds. I can't imagine one firm of accountants has all clients in one camp and none in the other. From BKDs comments it appears that is the case with his employer but maybe he hasn't made it clear.
I know very little about cars and have very little interest in them. My wife is much more into cars and has been on car maintenance courses. She used to stop and help when she saw cars broken down. With the progress of technology in cars it is less of an option.
It's surprising that bookkeeping software doesn't usually have reports that are useful for P11Ds but, then again, I've always been surprised that most bookkeeping software doesn't have a purchase invoice register.
Hopefully, HMRC will change the rules regarding P11Ds to avoid the wasted effort of dispensations and reporting expenses that don't result in a tax or NIC charge.
BKD seems confused
As I explained perfectly well previously, accounts will always be different because of opinions or materiality. That is understandable and nothing to worry about. One years accounts differences are usually caught up the next year. Accounts follow the materiality concept.
There's no materiality concept in preparing P11Ds. Are you saying there is?
How would you prepare a P11D from accounting data? From past experience you will ignore the question despite it being at the crux of the issue.
What is your idea of a "detailed examination of every single transaction"? I don't think it's necessary. If it's a bus journey I don't think you need to look at the bus ticket. I am happy to believe the client when they say there was a bus journey.
Not confused at all
There's no materiality concept in preparing P11Ds. Are you saying there is?
Yes - in the sense, for example, that trivial benefits (the definition of which involves opinion and judgement) can be ignored. I can point to several other areas of the benefits code where both materiality and judgement are involved. Anyone that knows anything about the completion of P11Ds won't need further examples.
How would you prepare a P11D from accounting data?
I wouldn't - at least I wouldn 't from accounting data alone
[
"Yes - in the sense, for
"Yes - in the sense, for example, that trivial benefits (the definition of which involves opinion and judgement) can be ignored. I can point to several other areas of the benefits code where both materiality and judgement are involved. Anyone that knows anything about the completion of P11Ds won't need further examples."
I think you are confusing rules with materiality. If an interest free or low interest loan doesn't go over £5,000 then there is no reason to report it. If the loan is for £5,001 then it needs to be reported. You can't say the increase is not material.
"I wouldn't - at least I wouldn 't from accounting data alone"
If you were responsible for completing a P11D, say as an employer, how would you go about it?
Nope - no confusion
I think you are confusing rules with materiality. If an interest free or low interest loan doesn't go over £5,000 then there is no reason to report it. If the loan is for £5,001 then it needs to be reported. You can't say the increase is not material.
I wouldn't be interested in the increase. What is relevant is the actual balance. But what I was referring to, as you well know, are trivial otherwise taxable benefits that do not need to be reported. And to other areas of the benefits code where judgement is required to determine whether something is significant, or 'material' in the context of P11D preparation. If you want to get hung up on the dictionary definition of 'materiality', feel free.
If you were responsible for completing a P11D, say as an employer, how would you go about it?
The first thing I'd do (already done) is apply for a dispensation to avoid having to worry about a whole pile of expenditure, thus reducing time, effort and costs. Because of the procedures we and our clients have in place, they work well for us and our clients. It bothers me not in the slightest that others see little or no value in dispensations.
But returning to a previous point, if one relies solely on the accounting data to complete the P11Ds then even a full examination of every transaction (which would be required if one operates a policy of zero tolerance, ie insisting that that there is no such thing as materiality) would carry a risk of omitting significant benefits, as well as reporting non-taxable items. I'm quite confident that our procedures are such as to reduce those risks to the minimum possible. That confidence would appear to be shared by our clients and by HMRC. I could care less that others' confidence is less high.
More opinion
"That confidence would appear to be shared by our clients and by HMRC. "
I think you are relying on false signals. HMRC have very little interest in P11Ds unless they relate to loss of revenue. I think clients have very little interest in P11Ds at all.
This opinion is based on working for international firms of accountants and large businesses based in London as well as owning my own small practice.
Horses for courses
I guess it comes down to different opinions based on different experiences in dealing with HMRC and clients. We do not 'rely' on HMRC's satisfaction with our retruns. It was simply an observation that HMRC have yet to find anything wrong with either our own or our clients' procedures.
But your comments do beg one question - if HMRC and clients have such little interest in P11Ds, why would one want to spend the time and effort to ensure that the returns are correct to the penny? I accept that there may be a small number of accountants that get a kick out of being able to tell their clients with 100% certainty that the returns are accurate to the nth degree. (Though the practice of relying on accounting data means that 100% accuracy is quite unlikely.) Personally, I'd prefer to spend my time being more productive and of greater value to my clients.
But each to their own. Perhaps one day our P11D policies will bite us in the [***]. But after many many years of dealing with P11Ds, handling Employer Compliance Reviews and HMRC enquiries why do I find myself quite unconcerned? Frankly, the 'advice' from someone that behaves the way they have done on this forum ain't worth the bandwidth and most certainly will not make one iota of a difference to the way we handle P11Ds.