P11D twiddly bits

I hate this time of year.  I have quite a few dispensations in place for clients now, but still too many P11ds to complete.  I really do fail to see the point where there is no genuine taxable benefit....

Thanks for the article Rebecca, but John Whiting, can you sort out this silly requirement to report non-taxable expenses?  The requirement wastes our time, HMRC's time, our clients money and achieves absolutely nothing for anyone.  It doesn't even stop there ... once the P11D has been submitted, HMRC invaribly assume the expenses are taxable, so yet more of everyones time is spent changing the PAYE tax code back to the number it was before the P11D was submitted!

The last time I applied for a dispensation, I was confronted with a 3 or 4 page letter demanding details of the expense claims for the previous 3 months.  If you are a sole director then forget it, as the dispensation requires that the expense claims have to be approved by someone else.

Surely there's got to be a better way than this!  Why not just put two extra questions on the P35: Were any expenses paid to directors or employees YES / NO.  If yes, were the expenses incurred wholly, exclusively and necessarily for business purposes YES / NO.

Last year I gave up applying for dispensations for mini cos because of the 42 question letter you used to get back , but this year, we've applied online and hmrc is not making such alot of fuss

I entirely agree that it wd be great to get rid of this pointless obligation, and the simple form suggested above does sound excellent   : that said, my cynical side thinks that if directors knew that there was no form filling requirement , would n't the majority just bung ever more expenses through   ?  

I would argue that most directors of SMEs don't really know what P11Ds are.  They will know their accountant does some payroll end of year stuff around this time of year and I expect most will guess any benefits in kind need to be taxed some how ... but the accountant deals with all that complicated stuff so they don't need to worry.

As for reimbursement of expenses, I would think most directors don't actually know that these should, strictly speaking, be recorded on the P11D unless there is a dispensation.

Some accountants don't tell their clients about these rules, the clients that are told don't fully understand what they are being told and tell their accountants there are no benefits or expenses to report, the remainder that do report expenses on the P11D or obtain dispensations don't really understand what is being done, as the accountant just sorts it all out.

Given that the majority of directors don't understand the existing rules, I doubt whether their behaviour would change much if the rules were to be relaxed.

I completely agree, and surely it is this kind of red tape that the government and OTS should be concentrating on rather than ever increasing audit thresholds, and proposing to exempt small companies from filing accounts at Companies House. I too have experienced a number of clients where HMRC include the expenses on a client's tax code despite them submitting a s336 claim, causing additional work and costs. Come on OTS this is a prime example of where you should focus attention on an issue affecting large numbers of small companies.

I have applied for a number of these having completed form P11Dx.

The letter that we received back is very clear what can and can not be claimed. 

If there is a sole director the P11dx ask if anyone checks the expenses.  I would suggest that since you are the company's accountant you could check them when the accounts are prepared and make any adjustments via the DLA

Just to add that it may be worth reapplying for a dispensation online if you last applied years ago because the newer version of the dispensation is much more comprehensive than the old paper version.

One key change being that you can use it to claim a dispensation if you pay HMRC's scale rates for subsistence (very useful as it saves having to tally up tiny receipts).

Also you can claim a dispensation for use of the employers' credit card so you can spare yourself the drama of reporting credit cards as alluded to by Rebecca above.

Agree with comments above about the duplication of declaring expenses of employment and then having to mess around making sure that that they are claimed as a deduction again, or worse still not suddenly coded incorrectly.. Surely one of the most pointless exercises in our tax system.

Virtual tax support for acccountants: www.rossmartin.co.uk

My wife and I are directors of our training and consultancy company. We applied for dispensations for travel, subsistence and professional fees.

This was granted straight away with the condition being that EITHER the claims were independently checked OR we had receipts to verify the expenditure where relevant which is in accordance with the instructions in the HMRC manuals.

I accept that HMRC might not apply this consistently but it is unfair to say they never grant dispensations to one or two-man family companies.

Malcolm

Nicola / All

I was told that you can only pay scale rates for subsistance and get a dispensation if you have so many employees that it would be unwieldy to wade through all the receipts. If there are only a few employees HMRC (quite reasonably I think) would expect you to reimburse only if receipts are provided by the employees.

Mileage reimbursement at 45p/25p does not get reported in any circumstances - this is made clear on the P11D.

Malcolm

Malcolm the new P11dx allows you to have dispensation for scale rates.  No minimum number of employees required.

I do wonder if in a round-a-bout way HMRC agree with many of the comments above hence the very relaxed new attitude to dispensations.  Or are they making it easier in PAYE inspections to find errors?

Paul

I applied for a dispensation using scale rates and it was refused. I don't think the new form means that HMRC will automatically accept a claim to use the subsistence scale rates but of course there is no harm in applying....

KR

Malcolm

Thank you Rebecca for an excellent article.

I just wanted to warn readers that if they tax all or some of their benefits through the payroll there are some special reporting requirements.  HMRC published the guidance last year but was it not well publicised so a lot of people missed it.  They are anxious for employers to get it right this year.

The guidance is as follows (extract from Software Developers notes dated March 2011):

Wholly payrolled benefits

This applies to employers who payroll all the benefits paid to their employees.

•One week prior to submission of the P11Ds, they should notify HMRC that all benefits for the year have been payrolled.They should complete the ‘amount made good or from which tax deducted’ box where this box is available for the relevant benefit.

•P11D information may be submitted online or in paper format but all paper P11D and P11D lists must be clearly marked ‘PAYROLLED’.

•They should complete P11D(b) as normal.

Partially payrolled benefits

This applies to employers who payroll some benefits for some or all of their employees.

•They should complete the ‘amount made good or from which tax deducted’ box where this box is available for the relevant benefit.

•They may submit online or in paper format:-

oP11D information for non-payrolled benefits.

oP11D information for payrolled benefits where they have a corresponding entry for ‘amount made good or from which tax deducted’

•P11D information for other payrolled benefits must be submitted separately in paper format and these separate P11Ds and lists must be clearly marked ‘PAYROLLED’.

•They should complete P11D(b) as normal.

 Payrolling expenses & benefits: P11D recording

Some employers currently payroll expenses and benefits, typically under HMRC agreement. These Employers still have to send in forms P11D, or equivalent, if they have entered into an arrangement to payroll benefits in kind and expenses. Employers may liable to penalties if they fail to do so. To avoid incorrect processing, it is essential that HMRC are notified in advance of the online submission of the P11Ds that expenses and benefits have been payrolled in that year.

Thanks for a timely and interesting article. I sort of gather from it that no reportable expense will arise in the following case, but I am not entirely sure.

-An office manager books business trips for other employees including accommodation and meal costs and pays for them using her own company credit card.

I think no reportable expense for her, because she is booking on behalf of the company (and in its name) and will not actually receive the accommodation or meals herself. No expense for the employee, since he has not made any payment. Am I right?