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Getting mixed up
This article is getting into a bit of a muddle in parts.
A P11D Dispensation and a PAYE Settlement Agreement are two completely different things.
A Dispensation is of course an agreement to exclude certain non taxable items from the P11Ds. Whereas a PSA is a separate arrangement allowing the employer to report certain taxable items outside of P11Ds and, importantly, to settle the tax and NI on these taxable payments on behalf of employees.
Also, car fuel benefits are reportable on P11Ds, it is very unusual (but not impossible) that they would be allowed to be incuded within a PSA.
I agree
Strange article to be posted when something as fundamentally wrong as that could be missed!?!?!?
This is misleading
The article implies that a dispensation removes the need to report taxable benefits, which is simply not correct. It reads as though written by someone who has had limited involvement with P11ds and only half understands the systems and implications.
This is very bad
“All transactions between employees and employers need to be declared, even if there is no tax liability.”
Even if there is no dispensation in place this is simply not true – see 480(2011) page 11:
“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, stationery 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 do not feature on the P11D.”
Still Unclear
I am still unclear whether the reimbursement of expenses by the company to an owner/director should go on a P11D ?
I am talking about small amounts of travel, subsistence, stationery etc purchased by the director either with his own cash or debit/credit card.
Not only do you have to do a P11D, but then the other form to claim that they are all legit business expenses and shouldn't be taxed.
Is it sufficient to just put the expenses and tax claim on the SA return ?
I received a letter from HMRC 18 months ago in response to such a question, where they said:
"As your client completes a self assessment tax return no further action regarding his expenses is necessary. I note from the 2009 Tax Return that he has declared the monies he received from His Company ltd and then claimed them as expenses, which is correct."
They then said:
"An employee who does [not?] meet the criteria for self assessment should obtain and sign a section 336 claim".
So I did not send a P11D last year !
A nonsense
Too many in HMRC make it up as they go along. But if you have a letter from them you should be fine.
You should enter travel and subsistence on a P11D but not stationery.
I am presently of the understanding that if you "consume" something - travel, subsistence, entertaining, phone calls" then they should go on the P11D but if you are simply an agent for the company's consumption then not - stationery, computer. This is all a nonsense because you are consuming the travel, etc. on the companies behalf.
I think P11Ds should be the first thing they should simplify.
P11Ds
Dear Peter, thank you for your jewel of an answer in a sea of despair. Why do the HMRC not make the point you highlight clearer covering the situation of Director A paying £x on behalf of Company B for their direct company expenses and just being re-imbursed £x for this - there is no taxable benefit in this transaction. Could it be the HMRC like to fine people for supposed non -compliance of completing the P11D correctly or am I just cynical.
Reasons
I've given up being totally cynical about their motives. I suspect it's due to stupidity given what I have seen. There is the supposed explanation of what to include on a P11D http://www.hmrc.gov.uk/guidance/p11dguide.pdf but I have never been too impressed by it. For years I had entered every expense payment that was made until I saw the note regarding expenditure as an agent. Both before and after this I have been told by HMRC staff that every payment has to be included on a P11D and other times I've been told that only payments that are a benefit should be included on a P11D.
It would seem sensible to only include benefits and expenses which were taxable.
Given HMRCs record so far I think that would be beyond their abilities.
What about Class 1 NIC?
I think HMRC have left out a very common error which is that not all benefits attract a Class 1a NIC liability. If the employer makes a payment on behalf of the employee, this should be entered in Box B of P11D to pick up the Class 1 Charge, which should be collected through payroll at the time it is paid. Failure to do this means that only secondary contributions will be paid over (in reality the Class 1 a NIC liability which is of the same amount as secondary Class 1)
The loss for HMRC is the primary Class 1 NIC (employees contribution) and the subsequent knock on effect on the contributory principle.
P11Ds and Company Card Payments
It is probably a good thing that the article has left space to spark such a flow of helpful advice! My query is - does the question of including travel, hotel and subsistence expenses on a P11d differ if the director uses a personal debit / charge card or a company debit/charge card to settle the bill?
No
If it's a company credit card it should go on the P11D.
If it's a personal credit card it should go on the P11D because the director is effectively submitting an expenses claim when the director's loan is credited or the expenses are refunded.
If anybody can explain the reasoning for having a requirement to put such expenses on a P11D I would love to know.
Wrong address given?
All of the P11D(b)s that we have seen need to be returned to Chillingham House, rather than Tynemouth House.
P11d s
Was it kind to print this article? it could be used as a test paper for trainees as 'spot the error'!
Can the publishers make sure that in future artlcles of 'apparent' merit are checked first.
Error correction
It seems to me that this article should have been written by Peter Saxton (editor of accounting web pls note for next year). Does anyone know what CIPP (policy officer ) as mentioned at the beginning of this article mean?
P11D Guide, 480 booklet and CIPP
I’m afraid I’ve only picked up what I do based on many years trial and error. There’s been very little practical help from HMRC – including the http://www.hmrc.gov.uk/guidance/p11dguide.pdf .
Worrying, despite the paragraph below being fundamental to the completion of a P11D, it is on page 11 of the 480 booklet but not on the P11D guide (as far as I can see):
“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, stationery 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 do not feature on the P11D.”
I’ve learned the most from other AccountingWeb members.
Frighteningly, CIPP stands for Chartered Institute of Payroll Professionals.
Address
The employer should send their P11d to Chillingham house instead of Tymouth House as I was told by HMRC.
Tongue in cheek
Peter how would you deal with toliet paper purchased by an employee. It is for his private use in the business toilet...
Depends
"Peter how would you deal with toliet paper purchased by an employee. It is for his private use in the business toilet... "
If it's for his private use and he was refunded by his employer it is a benefit in kind.
If he'd bought it for use by anybody who used that toilet he would be buying it as an agent of the business and it wouldn't have to be reported.
PiiD howlers
There have been a lot of complaints about this article and I have written in to suggest that it is withdrawn for correction. The complaints are mainly as noted above, so no point in repeating.
The section number that you are all thinking about in relation to employee expenses that do not need to be reported come under the header of "Accommodation, supplies and services used in employment duties" which is otherwise known to you and me as "post, printing, stationery and whatever else the boss asks you to buy for the company" is s316 ITEPA 2003, so if expenditure fits that header and is reimbursed you don't need to report it as it is specifically exempted from being employment income. Otherwise apply for a dispensation from reporting certain other expenses. You can do this online, but I warn anyone, that in the light of the new-ish tax penalty regime, you should take proper guidance before completing it as your responses may come back to haunt you at a later tax inspection.
Virtual tax support for accountants at: www.rossmartin.co.uk
Thanks and apologies
Thank you all for the robust feedback, and our sincere apologies to anyone who may have been misled by the original draft. Diana Bruce contacted me with amendments yesterday afternoon, but due to the failure of my laptop, I wasn't able to act until this morning.
Diana does understand the difference between dispensations and PSAs and apologised if the original wording did not make this clear. At our request, she delivered the piece in a short timeframe and missed the reference in her review. I compounded the confusion by not picking it up during editing, for which I would also like to apologise.
It is very helpul to have such an energetic peer-review committee on AccountingWEB, but as some of you point out, it would be far more preferable to get things right in the first place. We will review the incident internally and consider options that would give us a better level of technical accuracy.
I am certainly not an expert on benefits and PAYE, and as the debate here has shown, there are a lot of grey areas and anomalies in HMRC's guidance. For example, those who insist that paper forms should go to Chiddingly should note the 22 May Employer Update, which includes the new post room address at Long Benton.
I'm also consulting Diana about Peter Saxton's point on payments made on the behalf of employers for things like stationery and equipment. We may add a further paragraph to the piece to reflect his advice and that of Nichola Ross Martin.
Jon
Just because a HMRC bulletin tells you something you should not necessarily believe it. Just read thru the thousands of entries on AWeb to realise that a fair number of us are cynical about information released. The address at Chillingham House is that should on the P11d (b) that has been sent out by HMRC . In MHO HMRC are again in a muddle. If it had been an accountant setting this new address it would have been deferred until 1 August.
Addressing issues
I wouldn't all get too fired up about sending these things to the right or wrong address.
I recently responded to an enquiry, to the office in Cardiff from whence the enquiry came, a few weeks later the officer phoned to ask where my reply was - I faxed over a copy and got it all sorted/
A few weeks later still, I get a call from an office in Hull asking me what did they want me to do with the letter I had sent to Cardiff and which had turned up there !!
Apparently, many tax offices don't actually open their own post - they send it away to be opened elsewhere, then it gets suitably shuffled, and some, if you are lucky, may end up back at the office to which it was originally sent !!
So how hard can it be to open your own post ? I thought there were millions of unemployed people ?
I suppose at least they aren't flying all the post to Malaysia to be opened, yet !
(Sorry if I am getting off-topic, but the address arguments are a bit pointless).
P11ds
Read this bulletin with interest. I have found, when completing P11ds online, that if I report expenditure which is obviously not taxable, it nevertheless automatically calculates the NI on it. There doesn't seem anywhere to report the expenses as non taxable, thus nullifying the NI. What trick have I missed?
addressing issue
True in deed. HMRC are in a muddle. The big question is when will they get their act together.
Addresses
If HMRC are centralising things and scanning post why don't they tell everybody by announcing it and having a central posting address?
As usual they seem to be doing things in a confused way.
If you look on the HMRC website you would not know that there's been any changes unless you really dig around.
HMRC Addresses
I was looking for an address for a HMRC office the other day. couldn't find the page that used to let you put in the distrct no and then it gave you the address, but I did find this.
http://www.hmrc.gov.uk/agents/contacting-effective.htm
Which basically says there are now two addresses for income tax, one for SA and one for non SA. (Look right at the bottom of ther page) Not sure when they snuck that in, but I recall seeing something on an agent update about the centraliseation of post.
Why?
It's not exactly prominent.
They seem to be trying to make it very hard for anybody to know how to contact them.
Isn't the obvious place to put it on the Contact Us section?
Peter. Why are you suprised?
HMRC are in a muddle I think we all agree and this proves it once again.
Bananas?
I'm not surprised.
This country is getting more like a banana republic every day.
Scanning
There was also this this morning
http://www.hmrc.gov.uk/news/changes-incoming-mail-golive.htm
On the subject of scanning, but selective scanning it would appear.
Use of debit cards
MacDonald9 asked about the use of debit cards in two scenarios. I've always treated the two scenarios differently, but I'm unsure whether I'm correct.
Where a director purchases an item for the company and uses the company debit card, I regard that as the same as paying by company cheque - nothing to report on the P11D.
Where the director pays using his private debit card and is then reimbursed, he is effectively making an expense claim so an entry is required on the P11D
Any alternative treatments?
Nichola: P11D howlers
You refer to s316 ITEPA 2003. Doesn't this section relate to "benefit-type" rather than "reimbursed expense-type" situations?
I'm confused!
P11Ds for people working at home
Going back to the issue regarding employee purchasing items such as postage and stationery on behalf of the employer, I've always departed from the usual rule that these do not need to go on P11Ds in the case of directors working at home (eg one-man companies) for the reason that it is too easy for the taxman to say that there could be some private use. As it is usually necessary to file P11Ds anyway for small companies (unless you can get a dispensation without all the hassle you often get from old-school compliance officers) it is just as easy to be on the safe side and report these items too.
Same goes for computers and other equipment. It can be very easy for the taxman to suggest there may be an element of personal use (if he ever found out about them). My solution has always been to get the client to sign a form stating that the computer (serial number quoted) belongs to the company and has been assigned to the employee for the following duties and no private use is allowed unless it is "insignficant". Then scan it back to me by e-mail so there is contemparaneous evidence. Might be slightly paranoid but it's no real hassle and plays safe.
Incidentally, there is a brilliant article about P11ds on the link below:
http://static.bdo.uk.com/assets/documents/2010/05/P11DGuide.pdf
It refers to 2009/10 so there are a few changes on company cars but most of it of course is still valid. This tells you everything you need to know about P11Ds. Even those of us who regard ourselves as knowledgeable on PAYE benefits may find a few things they didn't know, so I would advise everyone to read it.
And you don't even need to register as a member :-)
Chris
Debit cards
"MacDonald9 asked about the use of debit cards in two scenarios. I've always treated the two scenarios differently, but I'm unsure whether I'm correct.
Where a director purchases an item for the company and uses the company debit card, I regard that as the same as paying by company cheque - nothing to report on the P11D.
Where the director pays using his private debit card and is then reimbursed, he is effectively making an expense claim so an entry is required on the P11D
Any alternative treatments?”
I would have done the same as you but it does appear that using a company debit card should be reportable. If there is more than one director how would we know who’s card is used? Do we have to identify which cards are used and allocate it to those director?
Corporate cards
I would say Yes as it is necessary to know who "consumed" the item, whether it be travel, subsistence, entertainment or some other expense which the employee benefited from. It doesn't really matter how the item was paid. The only thing that might matter is if the contract was with the employer, which affects whether it was a pecuniary benefit or not.
Most corporate cards show who the user is so it should be straightforward to analyse them. The book-keeper should have a separate account for each card and any P11D items should obviously be coded separately. I always split them to taxable and non-taxable items, with a separate account for any PSA items such as staff entertaining. It would obviously be a major headache trying to analayse all this at the end of the tax year so best if the client or book-keeper is trained to do it on an ongoing basis.
Chris
Multiple current account debit cards
"Most corporate cards show who the user is so it should be straightforward to analyse them. The book-keeper should have a separate account for each card and any P11D items should obviously be coded separately. I always split them to taxable and non-taxable items, with a separate account for any PSA items such as staff entertaining. It would obviously be a major headache trying to analayse all this at the end of the tax year so best if the client or book-keeper is trained to do it on an ongoing basis."
There can be more than one debit card for a current account and I would think it is less easy to analyse them as they are mixed with everything else that goes through the current account.
Other than complying with the legislation I fail to see what is the use of all this analysis.
All that analysis
"Other than complying with the legislation I fail to see what is the use of all this analysis."
Well there isn't any, unless the boss wants to know who spent the most on entertaining, etc. But the law says we must report expenses per individual, and this is the only way of doing it, so that is reason enough.
"There can be more than one debit card for a current account and I would think it is less easy to analyse them as they are mixed with everything else that goes through the current account."
True, although the statements usually show the transaction date, so that should indicate who incurred the expenditure. Also, if there is more than one director, it is usually easier to obtain a dispensation that includes entertaining and benchmark subsistence, which they still seem reluctant to grant for sole directors.
Chris
Employee Tax Code P11D
Hi
We have filled the P11d (2010/11) for an employee who has been given a Company Van for Business Use only( Section G). His contract says that he will keep a log of any personal use.
The benefit was £3k.
Now he has received a notice from HMRC that his Tax code for 2011/12 will be reduced by £3k.
Reading from P11d guidance form I believe that he should not be taxed as the van is used for Business & home to work use only.
Am I right that he should not be taxed?
Alan
Seems like a benefit to me
"Reading from P11d guidance form I believe that he should not be taxed as the van is used for Business & home to work use only."
What is the guidance that says home to work is not a benefit.
What is the change in tax code?
Company vans - home to work travel
Home to/from work travel in company vans is specifically exempt under the new company vans regime that came in a few years ago. It sugared the pill of the new regime a bit as the scale charge went up from £500 to £3,000.
The trick is proving that a company van is home to work (and/or business use) only. It usually means keeping a mileage log and all the fuel receipts, which van drivers are notoriously bad at doing. The only other thing you can do is estimate mileage restrospectively and try to reconcile it to the odometer figures (if you have them).
Chris