P11D bids farewell to section N

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Kate Upcraft bids goodbye to section N of the P11D form, but is concerned that HMRC has communicated this change too late to employers.

Employer Bulletin

On page 11 of the October 2016 edition of the employer bulletin, HMRC belatedly announced a change to the reporting of taxable expenses received by employees, which has been backdated to April 2016.

Dispensations to remove the obligation to report qualifying (tax-deductible) business expenses on P11Ds were abolished from 6 April 2016. Instead, employers have to take a view as to whether any expense (or benefit in kind) meets the ‘wholly, necessarily and exclusively’ test and therefore falls to be exempt from reporting on the P11D form.

Mixed use

The removal of dispensations for qualifying business expenses was not expected to affect the reporting of fully taxable or mixed-use expenses on the P11D, which are reported in Section N of the P11D and are subject to Class 1 NICs.

N section has gone

During an HMRC webinar early in this tax year, the presenter indicated that section N of the P11D would be removed for 2016/17. This was confirmed in the October 2016 edition of the employer bulletin. Section N of the P11D form allowed for the reporting of... register with AccountingWEB for free to read the rest of this article. 

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About Kate Upcraft

Kate is a technical writer, editor and lecturer on all aspects of employing people - primarily payroll and HR matters.

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21st Oct 2016 16:10

HMRC's article in the Employer Bulletin is incomplete and only tells half the story.

Some employee expenses are met by contracting directly with, and paying directly, the supplier. The company travel agent books a plane ticket and the bill is paid by the employer to the agent. If that expense is partly or wholly taxable, it has no business going through payroll at all. PAYE only applies to payments "to" a worker (the PAYE regulations are crystal clear on this), and Class 1 NIC would not apply. Only reimbursed expenses are caught by the new rules.

The EB article also glosses over the new NIC rules on expense advances that came in on 6 April 2016 - new para 1A of Part 8, Schedule 3, Contributions Regs, introduced by SI 2016/352. Any advance is deemed to be NICable earnings, even if the expenses are subsequently incurred and fully vouched. Lots of HMRC staff who go out on business might be surprised to see irrecoverable NIC deducted from their expense advances ...

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26th Oct 2016 12:20

So with the agreed mileage allowances for business travel is this the case too? 25p a mile does not fully cover the costs but does cover most simply paying this to the employee based on mileage submissions and checks will also be subject to NI and Tax?

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