P11D v Tax Codes

P11D v Tax Codes

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For clients without a dispensation, I have always reported expenses claimed (in addition to benefits in kind) from the business on a P11D. On the SATR employment pages I have entered those expenses where appropriate so that they would not be taxable on the individual.

Last year, HMRC sent out many changes of tax codes, which when challenged they stated was due to the P11D disclosure. This left my clients confused and was a bit of a dent to my confidence as I began to think I was blissfully unaware of a new rule for P11D completion.

Are there exceptions and exemptions (apart from the 40p mileage rule) that I should be considering before completing P11Ds in future? Surely I am not exposing my clients to higher tax payments because I am reporting too much?

Would really welcome any views in the current P11D season (before I send them off!) Thank you.
Graham Kemp

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By raj_choda.hotmail.co.uk
05th Jun 2007 18:08

Amount made good
Chris,

The “amount made good” refers to the employee having reimbursed the employer for the cost of the expense incurred by the employer on behalf of the employee and paid to the employee as reported on the “cost to you” column. Granted, a bit like a dog chasing its tail! If the employee has reimbursed the employer this cost in whole then there is no taxable payment conferred on the employee, if reimbursed in part or not at all, then a personal tax liability of any part not reimbursed arises on the employee. Employee can counteract by making a wholly and exclusively expense incurred as a nature of employment disclosure via their SATR. However it seems that HMRC are having difficulty cross-referencing tax return disclosures with P11D disclosures.

Raj

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By neiltonks
06th Jun 2007 07:48

Dispensation
This saga illustrates why it's a good idea, whenever possible, to routinely apply for a dispensation in respect of genuine reimbursed expenses.

Without one it's inevitable that cases will arise when the P11D and the SATR aren't matched in prior to tax codes being issued. This may happen more often this year as HMRC have said they're going to process P11Ds more quickly from this year.

A dispensation is to everyone's benefit as it prevents your client, their employees, their HMRC office and yourself having to go through this charade!

Neil.

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By raj_choda.hotmail.co.uk
05th Jun 2007 13:37

S336 claim accompaniment
Graham,

We follow the same practice as you, only we also prepare a Section 336 claim and send it as an enclosure with the form P11D.

Then when completing the SATR we enclose a copy of the signed Section 336 claim and client also makes reference to the claim submission within box 1.40 of the appropriate employment supplement.

The trouble is the paper enclosure of the claim means online submission is not possible and so would like to abandon the practice, yet anxious of HMRC making code changes as in your experience.

Interested to know from anyone, if in a situation where only expense reimbursements of wholly and exclusively expenses incurred in the course of employment are the only issue, is it really a risk to leave it off the P11D all together?

Raj

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By NeilW
05th Jun 2007 15:36

The problem is the P11D
P11D is a reporting, tracking, taxation and expense document all rolled into one. It's a lousy form.

I use the http://www.hmrc.gov.uk/employers/ebik/index.htm EBIK guide to determine whether things are supposed to go on the P11D or not.

Beyond that there is little you can do if HMRC insist on using P11D as a coding tool without cross-referencing it with the tax return.

NeilW

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By AnonymousUser
05th Jun 2007 17:02

One view is that
in section N of P11d, "amount made good" refers to the employee's actual expenditure, ie it is "made good" by being expended on the employer's behalf. This is equal to the "cost to you", leaving a taxable payment of nil, which is correct if there is no benefit.
Or am I misunderstanding this whole conversation.

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