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HMRC retires online P11D form for small companies


The decommissioning of HMRC’s Online End of Year Expenses and Benefits service will come as a surprise and inconvenience to the many small employers that have used it. Ian Holloway advises on the other options for payroll managers of smaller companies.

17th May 2022
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HMRC’s April Agent Update directed advisers to a section in the February 2022 Employer Bulletin entitled Decommissioning of HMRC’s Online End of Year Expenses and Benefits Service April 2022. Very simply, this advised that the interactive PDF service, commonly used by small and medium-sized employers, would not be available for use for 2021/22 submissions.

Employers who previously relied on the online End of Year Expenses and Benefits service need to consider their options now that the online form is not available for tax year 2021/22 and onwards. If the news has come as a surprise, it may be worth starting with a summary of what the service allowed:

  • Interactive PDF capability enabling small to medium-sized employers (up to 150 employees) to create P11D forms for their employees
  • The capability to create, send and amend P11D and P11D(b) forms electronically or for printing and posting
  • The facility to create and submit a ‘Nil P11D(b)’, essentially saying to HMRC that there is no Class 1A National Insurance liability.

Payroll managers will know that tax year 2021/22 is not totally complete until employers have completed all of their P11D returns and made submissions to HMRC. This annual process includes the submission of form P11D(b) and payment of Class 1A National Insurance Contributions.

From three to two

Employers who do not payroll their benefits, which by-passes the annual P11D process, previously had three ways to submit returns electronically:

  1. Via payroll software (depending on functionality)
  2. HMRC’s PAYE Online service (for submissions up to 500 employees)
  3. HMRC’s Online End of Year Expenses and Benefits service (for submissions up to 150 employees).

With the decision to retire the End of Year Expenses and Benefits service for tax year 2021/22, there are now only two ways for employers of any size to report and submit details of expenses and benefits for tax year ending 5 April 2022: via payroll software (depending on functionality) and HMRC’s PAYE Online service (for submissions up to 500 employees).

With short notice, employers and agents who depended on the interactive PDF service will have to consider which of the two remaining options suits them best.

Payroll software

HMRC provides a list of “recognised” free and paid-for software. The word “recognised” indicates that HMRC will accept online returns from them in the required format. However, the HMRC software list needs to be accompanied by the warning that not all software is the same. 

Some payroll programs may have expenses and benefits functionality, some may not. 

Using software can be an expensive option, especially if employers are using this in addition to software used to run their payrolls. Like anything, employers are advised to check the features of the software to ensure it meets their requirements within their budget.

HMRC’s PAYE Online Service

Moving to HMRC’s PAYE Online Service is the natural choice for many firms that relied on the online PDF. This switch would be a progression, as the online service provides more functionality than the decommissioned one. For example, as long as the employer has signed up for and received a Government Gateway user ID, they can submit the P46(Car) online in addition to expenses and benefits returns. 

The PAYE Online Service caters for more than 150 employees and there is no requirement for downloading the latest version of Adobe Reader.

Employers should review HMRC’s guidance on functionality and/or consider the technical support that is available on 0300 200 3600.

The payrolling option

Once 2021/22 P11D / P11D(b) returns are submitted, the decommissioning could prompt employers to consider the move to payrolling expenses and benefits.

In its simplest form, payrolling is where an employee puts the taxable value of an expense or benefit through the payroll, the P11D obligation is avoided altogether. The tax liability is collected via the payroll and removed from the employee’s tax code. So, for example, if a benefit has an annual value of £1,200 and the employee is paid monthly, an extra £100 is added as a notional/non-payable item each month. The tax liability is collected via that payroll and it does not result in extra monies being added to net pay.

However, the payrolling option is not as simple in reality. Employers have to register to be able to do this in the first place and have to have processes in place to know the taxable benefit on a per-pay-period basis rather than obtaining the value once annually.

The decommissioning of a service used by many employers certainly poses questions for the submission of 2021/22 returns but also poses the question of whether the employer should make more radical decisions going forward.

Replies (17)

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By Hugo Fair
17th May 2022 16:08

Clear and succinct as always - although it might have been useful to remind that registration for Payrolling Benefits (any for which registration does not already exist) has to be completed before the start of the Tax Year ... so that option for 2022-23 BiKs is long gone.

And "also poses the question of whether the employer should make more radical decisions going forward" ... would you like to elucidate, Ian? Oh go on, go on .. you know you want to!

Thanks (3)
Replying to Hugo Fair:
Ian Holloway
By Ian Holloway
18th May 2022 08:48

Yes, of course, the payrolling request deadline for 2022/23 is gone (10pm on 05 April 2022).

By 'radical' under the payrolling section, it is this I am referring to. I firmly believe that any scheme that is voluntary will become mandatory in time. Therefore, employers / agents / bookkeepers etc should look at the way that they complete and return P11Ds now and make the voluntary move to payrolling before they are mandated to.

The two that cannot be payrolled at the moment are employer provided living accommodation and interest free and low interest (beneficial) loans. However, these do not make-up the majority of benefits that are provided to employees. By far the most common are the benefits reported at Box B 'Payments made on behalf of employee' which includes medical and dental benefits. I do believe that employers should look to working towards getting a per-pay-period value and putting this through the payroll (for tax, not NICs and as a notional payment).

Payrolling sounds easy and, in its simplest form, it is. We manage to put through an annual salary and pay it on a monthly / weekly basis, so payrolling a benefit is not more complicated than that. It's the communication to employees, the registration with HMRC and the change of processes and practices that is the complicated bit. When I have payrolled benefits in the past, I estimate that it took at least 6 months for me to get everything in place, not least the all-important buy-in from employees and providers.

Payrolling is a radical change for all, however, it's a change that is going to happen anyway, so let's get ahead of the game and do it before legislation tells us we have to. In my opinion, of course.

Thanks (1)
Replying to Ian Holloway:
By matttaxnpayroll
18th May 2022 10:16

I remain unconvinced about payrolling benefits - HMRC keeps extolling it's virtues but I'm yet to see who actually benefits except HMRC themselves. For medical benefits it's usually simple with one annual figure to divide by twelve, but others are more complicated and putting them in a monthly payroll doesn't save work for employers and employees still pay the tax - now just brought forward.

And employers still have to file the P11D(b) at the end of the year so class 1A gets paid. Surely it would be best to enable that to be included in the payroll too, and save what should be unnecessary work?

As for mandating, this has been a voluntary option for a few years now and still no sign of it being mandated, nor of a solution for those two benefits that can't be payrolled.

I see why HMRC wants it, and how it could help them (and therefore potentially the taxpayer), but I'm still not at all positive about it on employers' and employees' behalf, nor my own as someone who does payroll and P11D's for clients.

Thanks (5)
Replying to Ian Holloway:
By Hugo Fair
18th May 2022 10:29

Ah ... not sure how radical that is (guess it depends on how averse to change one is), but wise words. Thanks.

One quibble ... "payrolling a benefit is not more complicated than that (putting through an annual salary on a monthly/weekly basis)".
I know what you mean, but there are some extra complexities that can arise ... depending on the T&Cs of the benefit provider.
In particular with regard to early termination of the benefit (because employee leaves part-way through the year), or where the benefit year doesn't align with the tax year, or where the employee elects to change the cover in mid-year, or any temporary period without pay that may/may not mean temporary suspension of the benefit.

The common factor with all those is that, unlike salary, it is not the employer's remit to decide on any variation to the regular amount to be taxed as notional pay ... so they will need to have identified the constraints imposed by the supplier's T&Cs and pre-determined within their employment T&Cs how those scenarios will be processed.

I guess that's just one part of why "it took at least 6 months to get everything in place" ... so I agree it is a real 'project' to make the move - not just a few more payroll elements to add in to your software.

And that's the problem. Every employee requires paying (so putting in place the mechanism & processes to do so is expected); whereas in many businesses the number of employees with one or more BiKs is minimal (so the effort of putting in place the payrolling of benefits doesn't seem commensurate, whilst it remains optional).

Thanks (7)
Replying to Hugo Fair:
By Humber
19th May 2022 08:49

I totally agree with you about the complexities that can (and do) arise. Although, we do have all of these complexities in day-to-day payroll processing, with starters, leavers, late overtime notifications, salary increases and decreases, non-notification of events requiring backpay and recalculations, maternity, paternity etc etc etc. The list goes on of things that we take in our stride and get on with, trying all the time to tighten up processes to minimise these things in the future.

Payrolling is a major project and all I am saying is that employers should consider whether it is achievable and, if not, what changes are necessary to make it become achievable. One of the biggest issues I had when payrolling medical benefits was getting the provider to tell me on a monthly basis when people had changed their cover level (on marriage etc). Premiums used to change in January and that was another exercise, changing all of the taxable values in the payroll. However, eventually, I was able to change my processes so that, effectively, P11D processing was done on a monthly basis rather than an annual one.

It wasn't easy but the biggest issue I had was getting buy-in from employees. That was a massive communication exercise with a remote workforce. But I did it and the employees could see that they were paying tax on the benefit at the time they were receiving the benefit. Of course, at the end of the year , I still had the P11D(b) exercise to go through but with all of the values in the payroll anyway, it was relatively simple to add up all of the values and multiply them by the relevant percentage.

Again, payrolling is a major change and I am not trying to give the impression it isn't. And I'm not saying that it is right or achievable for every employer for every benefit. But the move from voluntary to mandatory has to come, with HMRC already referring to the annual P11D process as a 'legacy' one. I just don't want employers to be taken aback when this does happen.

Thanks (2)
Replying to Ian Holloway:
By adam.arca
18th May 2022 13:10

Ian Holloway wrote:

The two that cannot be payrolled at the moment are employer provided living accommodation and interest free and low interest (beneficial) loans. However, these do not make-up the majority of benefits that are provided to employees.

Payrolling is a radical change for all, however, it's a change that is going to happen anyway, so let's get ahead of the game and do it before legislation tells us we have to. In my opinion, of course.

Au contraire, by far the most P11Ds I complete as a small accountant acting for small companies is by reason of beneficial loans. If payrolling is to become compulsory and it can't accommodate that, then payrolling is no more useful than a chocolate teapot.

More generally, small businesses need payroll professionals to a) realise that micro employers (anything less than 1000 headcount to a payroll bod, it seems?) don't have payroll departments to spend all their time monitoring this stuff, and b) fight their corner on issues like this rather than rolling over and allowing HMRC to have what they want without even a murmur: take a leaf from the GP end of the profession and at least make a fuss a la MTD.

Thanks (1)
Replying to adam.arca:
By Humber
19th May 2022 08:20

I have also worked in places where beneficial loans make up the majority of the P11D submission. The current way in which the benefit is calculated makes it something that is very difficult to payroll - perhaps time for that to change if it is ever going to be added to the list of benefits that can be payrolled.

From experience, though, I would say that medical benefit is the one that is the most common (and I wish I could find the statistics that said this made-up about 90% of the benefits reported on the P11D, though not 90% of the total £ value of BIKs reported)

Thanks (0)
Replying to Humber:
By adam.arca
19th May 2022 13:14

Yes, medical insurance is pretty common although it still probably only appears on a minority of the P11Ds which I complete.

But I would rebut the assumption that even this is a good fit with payrolling.

Current position:
* P11Ds get completed once a year
* Accurate calculation based on actual costs in the tax year (probably based on 2 different insurance periods) and over staff coming and going, all in one pass

Proposed position:
* Ask for updates every month
* No deadlines to waive in the client's face to enforce timely compliance
* Change calculations as updates are informed to us
* Lots of backwards adjustment because those updates won't be timely
* 12 opportunities a year for staff to whinge / quibble etc rather than just the one
* Zero attempt (I'm guessing) at client education by HMRC will result in widespread ignorance of the change and also widespread turning a blind eye even by those aware there has been a change

How exactly is any of that an improvement? When will HMRC realise that it isn't what's good for them that is good for UK plc for tax collection but what's good for the taxpayers / the profession and HMRC as a unitary whole?

Thanks (1)
Replying to Ian Holloway:
By Humber
19th May 2022 07:53

Of course, I meant Box I, not B!

Thanks (0)
By AndyC555
18th May 2022 09:48

"In its simplest form, payrolling is where an employee puts the taxable value of an expense or benefit through the payroll, the P11D obligation is avoided altogether."

Although not the P11D(b).

Thanks (1)
Replying to AndyC555:
By Humber
19th May 2022 07:57

And that is another thing that would have to change, I agree. If payrolling is to be made more 'attractive' to employers, if the benefit is subject to tax in the payroll it should be subject to Class 1A NICs in the payroll.

Thanks (2)
By Moonbeam
18th May 2022 10:20

It was clear last year that HMRC wanted to limit the number of filing options.

However one client just couldn't register in time this year for in year P11D's partly because the process is so very complicated.

HMRC should feel grateful he tried.

Thanks (1)
Replying to Moonbeam:
By Humber
19th May 2022 08:02

See 'Other ways to apply' at There is still the requirement to submit a P11D though AND payroll!

But I agree with you. Payrolling is obviously HMRC's preferred choice but they have to make the whole process easier for employers.

Thanks (1)
By dmmarler
18th May 2022 11:15

If the main purposes of these "benefits" is to keep the workforce healthy and productive, then I would regard this as a genuine business expense rather than a personal benefit to the employee to be taxed. This particularly when the NHS patently cannot cope with demand, and if anyone needs anything done to keep fit enough to continue work it has to be paid for.

Thanks (0)
Replying to dmmarler:
By tedbuck
18th May 2022 12:18

This is very true - private medical insurance should be permissable as a deduction. As has been said it enables staff to be cured and got back to work with minimum absence.
Waiting 3-6 months for the NHS to do anything just doesn't make sense in the real world. The Government should be on bended knees, not to the NHS which is a shambles and not fit for purpose, but to the private sector and those who pay for it so that staff and others can get back to work and cease to be a potential burden to the NHS which wouldn't cope anyway.

Thanks (1)
By Pam Moreland
18th May 2022 11:28

Our P11D software (IRIS) doesn't allow you to send in a nil P11D(b) so the only current option if a nil return is needed is to use the HMRC service. Therefore if HMRC sends a notice to file and it is nil we shall have to go back to paper unless the software changes as otherwise there is a penalty which then has to be appealed etc etc. More wasted time.
And that is progress!

Thanks (3)
Replying to Pam Moreland:
By Geoff56
18th May 2022 12:36

You can use this HMRC structured e-mail for agents, to advise that no P11D(b) is due. It works a treat.

Thanks (2)