To P11D or not to P11D? By Nichola Ross Martin

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Accountingweb.co.uk's tax editor, Nichola Ross Martin considers the P11D dilemma faced by many in small business: Do I bother to complete one or not?

To P11D or not to P11D? That is a really interesting question for small business which I had never really considered too deeply before HM Revenue and Customs (HMRC) issued its consultation last December on payrolling benefits in kind and expense payments.

Reactions to the consultation have been extreme. It seems to be a bit like riding a Harley, you either love it or hate it. Passing the burden of taxing benefits and expenses onto employers is a big money saving wheeze for HMRC, but every action has an equa...

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30th Jun 2008 09:10

Directors' Loan Account
Andrew,

How useful that EIM12016 will be, thank you for pointing it out - so many HMRC employees just cannot grasp what a DLA is.

Typical though, that what is a clear explanation that will be difficult for various other HMRC departments is written as an excercise in trying to extract tax via a claim that amounts paid out are NICable as payments on account of earnings.

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By Anonymous
27th Jun 2008 10:58

red tape/government waste
Jon is right. It is scandalous that so much time and money is wasted by us and the government on pointless P11ds. I have no idea if they can be filed online, I know we don't, so presume they are dealt with by hand and so presume it is a big part of HMRC's work, of which only a very small fraction serves any purpose at all.

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By Anonymous
27th Jun 2008 13:24

Alternative To a Dispensation
One approach that has withstood for us the test of an inquiry by HMRC's Personal Returns Compliance Team is to rely heavily on the exception within HMRC's booklet 480 entitled "Expenses and Benefits - A Tax Guide"

EXTRACT
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, stationary (sic) 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 reimbusrements need not feature on the P11D.
END EXTRACT

All clear enough - and for most employees / directors of SME's that will surely just leave (i) travelling and subsistence; and (ii) entertainment. And given the vogue for claiming 40p mile for motor travel these days, travelling and its associated subsistence becomes simplified. HMRC's Booklet 490 lays out the special set of rules for Travelling (and Subsistence) that Nichola refererred to earlier.

The Revenue were sticky about letting us apply the above rule about "Purchases on employer's behalf" to travel and subsistence, but seemed happy enough to allow us to run the odd director's BIK item (eg pu phone) that didn't fit any of the above categories, and more importantly business expenses for travel and subsistence that had been paid for by the director and reclaimed through his expenses, through the DLA (hence justifying their omission from a P11D) - all courtesy of the Revenue's example DLA a/c found at http://www.hmrc.gov.uk/manuals/nimmanual/nim12016.htm (the £3,000 credit entry for "Business expenses paid by director" subdued any objections).

HMRC Booklet 480 also contains a useful mopping-up para, entitled "Trivial benefits", in which a seasonal turkey or two bottles of wine are cited as too "trivial" for P11D inclusion.

Finally, the Revenue seemed comfortable with the idea that subsistence need only be attached to travel, and not necessarily involve overnight accomodation; although the journeys in question were by and large significantly long journeys dawn to dusk.

It's a simple enough approach that for many just leaves "entertaining" as the main P11d item to be fished from the books.

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27th Jun 2008 10:44

P11D's
If the powers that be want to get rid of some red tape then please abolish the need to report on P11D's non taxable expenses. It's completely pointless.

I have dealt with this in my practice by applyng for dispensations for all clients. However a major problem is that most of my clients are small OMB's and the dispensation policy varies greatly between tax districts. Some districts will without enquiry issue a comprehensive 4 page dispensation covering everything - even for a newly formed company. Other districts will write back asking for the ins and outs of expense procedures and enter protracted correspondence before either saying 'no' or allowing just travel, citing some 'working together' authority for their intransigence. Other districts will allow everything except directors entertainment, and so it goes on. All districts word their dispensations differently. There's no consistency - its a nightmare.

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By Anonymous
26th Jun 2008 19:55

Bad Karma?
Whack it through the DLA if the director has any sort of credit balance to speak of.

ie treat the company's payments for said director's mobile phone (urgh... more fool him!) as if they were debits to his DLA. Recharge x% (let's say 80%?) on his expense sheet as company business - report on his P11d with an accompanying s336 claim.

No NI/tax/payroll entries/liabilities that way.

VAT
VAT Office are fairly relaxed about this (ie phone being in director's name rather than the company's name), provided you declare negative VAT inputs of (in this eg) 20% of whatever the phone's VAT inputs claimed have been.

NEGLIGENCE
Advise director to chastise his accountant for not advising him to put phone contract in Company name. Further advise him that accountants can these days not only be sued for bad advice, but also for failure to give good advice. Further advise him that he should on no account allow his kids to take up accountancy as a career / hobby / passing interest.

Always assuming your client gives two hoots about his phone / his kids / your opinion.

I had what has become my annual dice with death at 7am on M25/M3 earlier today, and ducked off in panic/relief for an enjoyable and enlightening hour in a lay-by with a happy-go-lucky snack guy and two of his best bacon butties (alliteration rules!). Aside from being in dire need of some hols, I am hacked off with the prospect of imminent P11ds and wonder whether anyone has discovered a way of getting clients to actually place any value on these? Of course, if they regard these retarded documents as having £nil value then they will wish to pay you accordingly.

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25th Jun 2008 13:36

Dispensation for OMB
Just to follow up on Richard's post (23 June, 16.51pm) about successfully obtaining dispensation for one man companies,

http://www.hmrc.gov.uk/paye/exb-intro-dispensation.htm

"If it is not possible for you to operate an independent system for checking and authorising expenses claims – for example, because you are the sole director of your company and you have no other employees – you will only be able to obtain a dispensation if you:
ensure all expenses claims are supported by receipts for the expenditure
demonstrate that the claim relates to expenditure that can be covered by a dispensation – your receipts may be sufficient for this purpose, but if not you must retain additional information "

So keep those receipts & go for it!

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By Anonymous
26th Jun 2008 08:34

Pradip...
This should be added to gross pay through the payroll and nic and paye deduected. No entry on P11d.

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By Anonymous
25th Jun 2008 11:44

Lunchtime Meals
Could we have a straw poll on just how far a director / employee should be from his base before his subsistence expenses (ie lunch) become allowable? No accomodation or overnight stay involved - just a straightforward lunch on his own as part of his travelling expenses on a business trip that begins in the morning and ends later that same day.

btw not a sales rep or the like - just a straightforward director whose ordinary place of work is office-based.

One former mentor used to advise clients not to eat within a 30 mile radius of workplace or home, but that was many years ago.

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By Anonymous
25th Jun 2008 11:12

No Riff-raff?
I think I'm with Anon on his view that subsistence is a test of purpose, although the Revenue's guidance at EIM31835 is liberal enough to allow everyone to get their noses into Gordon's trough, regardless of their status or importance:

"...the cost of business travel is not usually a factor in deciding whether or not a deduction is due. For example, you should not refuse a deduction for first class rail travel, if that has been incurred, on the basis that the same journey could have been made more cheaply in standard class."

and...

".... you should not refuse a deduction for the actually incurred cost of a journey, hotel room or meal simply because a less expensive alternative is available."

I read that as a green light for any director, reagardless of his lifestyle or status, to opt for first class travel and Restaurant subsistence that will be tax-allowable. The manual pays lip-service to what it terms "lavish" expenditure, but it's woolly!

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By Anonymous
25th Jun 2008 10:57

Simon,
The consultation: I did refer to the proposals in the article, and they are still just proposals at this stage?

What concerns me is that no one has considered expenses from the small company perspective, and so as you say, we have conflicting advice and it seems to be a bit of a lottery whether you are lucky enough to get a full dispensation or not.

I wager that this will not change if P11Ds are abolished; we will all fill in some form to say "Yes, we will take our tax compliance seriously" and then hopefully get a letter back to confirm that a dispensation has been granted.

Two pointless pieces of correspondence! A better way to cut administrative burdens would surely be to only have to report benefits and expenses that lead to a tax or NI liability. No liability, no reporting requirement P11D or payroll. Aah, the vexing issue of red tape reduction v small company tax!


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25th Jun 2008 10:50

Conflicting advice on the HMRc website
I have long thought the HMRC advice on what should go on forms P11d is patchy and confusing, and this discussion confirms that.

The 490 booklet insists that all travel tickets should go on the form P11d ( See para 9.4 of 490 http://www.hmrc.gov.uk/helpsheets/490.pdf
But advice given on the expense and benefits in kind pages elsewhere on the HMRC site concerning goods or services used in the business paid for by company credit card or charge card , is that these costs do not have to be shown on the form P11d ( as pointed out below):
http://www.hmrc.gov.uk/employers/ebik/ebik2/credit-01.htm

Nichola suggests that travel tickets are a special case and should not be considered within the 'services used in the business' exemption from P11D declaration ( if paid by company credit card). But why? Is travel not a service?

If the director does follow 490 and put the travel ticket costs on his form P11d this will obviously generate a tax charge, unless he makes a claim for a deduction under ITEPA 2003 s. 337. But s. 337 says a deduction can only be made for travel expenses if the employee is obliged to incur and pay them as holder of the employment. If the employer has incurred the expense ( by using the company charge card) the employee is not obliged to incur the costs so cannot claim under s. 337. This means if the employer follows the instruction in booklet 490 and the director follows the letter of the law the director will be taxed on a business expense he has not incurred.

I have tried to get an answer on this point from HMRC , but the only response I ever get is : the company should apply for a dispensation.

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25th Jun 2008 10:29

abolish it
I am surprised that in all this nobody has mentioned that the current intention is to abolish the P11d and replace it with payrolling expenses (and with dispensarions).

And my understanding is that HMRC's official line is that dispensations should be much easier now. As ever there appear to be pockets of front line troops who seem to operate independently of official policy !

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By Anonymous
25th Jun 2008 10:10

Ramsey
Surely the Ramsey question is a test of purpose. If the director in question is sufficiently important to expect to stay in the best accomodation then by extension the best restaurants would be expected also. The purpose is subsistence and therefore allowable.

If the director is not that important (for want of a better word) then the purpose becomes reward and it is taxable either as a BIK or remuneration.

Wouldn't want to argue the point with an inspector unless the client was Bill Gates

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By Anonymous
25th Jun 2008 09:49

Sue
Explain the error to your tax office? An innocent mistake with no tax at stake should not be problem for anyone.

Andrew
You are mixing your rules between employees and the self-employed here. For employees only (so stop worrying about Calibotte v Quinn) if travel qualifies as business travel, then subsistence is claimable too.

What is the exact difference between subsistence and entertaining of staff? Well, i would take it on a case by case basis, but to claim that every meal at Mr Ramsay's is subsistence really takes the biscuit! Check out the civil service and foreign office rates and you will see what the government regards are normal rates for employees.

On saying that, it is clear that many MPs regard themselves above any law that applies to normal folk, and so you could trying to claim restaurant meals on the basis of what MPs or even MEPs claim if you can track down the data. Might be OK if you director is mixing in those circles - i.e. works for a lobbying company or something. I would be wary about it.

Entertaining clients
Yes you can entertain clients, and this is not a BIK, but read my previous posting again.

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By Anonymous
24th Jun 2008 21:55

Dispensations
I took over a payroll for a company at the beginning of this tax year; no P11Ds had been issued for the 2007/8 tax year (and were stated as being not due on the P35) despite there being subsistence claims, a business debit card etc (but ultimately no tax due). I applied for a dispensation, which I received pretty promptly, but only valid from the start of this tax year. What should I do (if anything) about previous tax years?

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By Anonymous
24th Jun 2008 20:36

Distinguishing Entertaining From Meetings?
And then there's the separate loophole on "Entertaining":

Back to the Revenue's booklet 480 www.hmrc.gov.uk/guidance/480.pdf for this: Chapter 20, and in particular 20.2 to 20.9) contains Tax-tip Pam's loopholes. In particular:
20.4 The expenses of a particular occasion are normally allowable if the purpose was to discuss a particular business project. They may also be allowable if the purpose was to discuss a particular business business project. They may also be allowable if the purpose was to maintain an existing business connection or to form a new one, even though no particular business was actually done.
And to dispel any doubts:
20.5 Where the entertaining expenses incurred on a particular occasion are allowable no restriction is made for the cost of the employee's own meal.

I have a few clients who are well clued up on this, and stand themselves and their prospects / clients / business contacts slap-up meals (though not at Gordon's - but equally overpriced) and religously record the purpose of each meeting on the XL expense sheets they send us.

So that's tax allowable, P11d reporatable, but with an accompanying s336 claim, for "entertaining" - sorry I mean business lunch at the restaurant round the corner from base, with a particular purpose attached to the lunch, say to discuss how well a particular project is going (and of course suck up to the main contractor).

Or is it?

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By Anonymous
24th Jun 2008 20:34

Where To Draw The Line on Subsistence?
Nichola, I'd be interested to hear your opinions on these subsistence cases:

The Pam who dines at Gordon's is not really an entertainment case at all: she and Mr Pam (her co-director, and also an employee) make frequent bona-fide trips to London - say 75 miles each way - and lunch out as a twosome at London's finest.

As you have said in your first para, if travel is allowable then so is subsistence. The Revenue's examples have always seemed a little ambiguous to me, as they are careful to avoid cases where the employee / director doesn't have an overnight stay.

Q What are your thoughts on the allowability of an employee / director claiming subsistence on a 150 mile round train trip (bona-fide travel), as in the case of Pam above, where there is no overnight stay? Would your answer be different if, as in the case of another client Pam B, she travels 30 miles by car from from her office to the Great Metropolis?

I've always taken literally the view put forward in IR booklet 480 www.hmrc.gov.uk/guidance/480.pdf (re employee expenses) "The expenses rule which applies to travel costs also covers related subsistence costs. This type of expenditure qualifies for a deduction where it is part of the cost of travel necessarily incurred in the performance of the duties". So that's tax-allowable, P11d, and s336 claim. But for me there are at least 3 issues over subsistence:

1 Is it reasonable to rack up a cricket-score of a lunch bill?
2 Where should you draw the line on distance from base? 30 miles? 50 miles?
3 What if there is no overnight stay? on this latter point tax-tip Pam has clear views - she makes regular long-haul trips North on what are effectively deliveries, and has an expensive meal at some point in the day. Her argument is that just because she elects not to stay overnight in a hotel but prefers to head South (who wouldn't!) for home late in the evening / night, her subsistence should not be disallowed.

What are your thoughts Nichola? (btw this is all employee related - I know all this would not apply to the self-employed because of the "eat to live not eat to work" decision in Caillebotte v Quinn).

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By Anonymous
24th Jun 2008 16:31

Andrew
Trying to do it by the book:

Subsistence is tied to travel, if travel is allowable so is subsistence. Reportable on a P11D unless you have a dispensation not to.

Entertaining staff - well, one man's meat is another man's poison...how many meals at Gordon's did you say? Continual eating out on one's own probably is more indicative of a personality disorder/boredom or gluttony (!). How a company claim that this falls under s 74 ICTA 1988 "wholly and exclusively" when the company is not trading as restaurant critics I am not sure. Likewise I cannot see that it can pass as normal subsistence, the only tax break I can work out is that it could count as a staff party.

Beware what a tips magazine says about taking staff to resturants/pubs, and claiming "the canteen rule". I think that that particular tip is just plain wrong.

Yes, entertain clients/customers and it all counts as entertaining. You need to keep records of who and why if the figures are unusually high. What is high spending for one business will be peanuts for another though, so decide on a case by case basis.

Entertaining will need to be reported on a P11D if the employer reimburses it, unless there is a dispensation.

The only other way around this is for the employee to make a claim under s 336, and claims under this section are generally far from easy for employees. I have not heard of one for entertaining - anyone seen a case on s 336 ITEPA 2003 or old s 198 ICTA 1988?

Rob
That guidance echoes s 316 ITEPA 2003 no tax or NI on accommodation, goods and services. I note that it does not talk about the position for using an employers card for purchasing travel or entertaining.


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24th Jun 2008 16:04

Purchases by credit card
There certainly appears to be conflicting guidance from HMRC. However the following seams to suggest that purchases made by company credit card don't need to go on P11d provided the conditions listed at the bottom of the page are met. I guess stricly speaking the company should keep sufficient information to show that the conditions are met or alternatively enter the items on form P11d (or of course rely on a dispensation).

http://www.hmrc.gov.uk/employers/ebik/ebik2/credit-01.htm

"Credit or charge cards provided by an employer and used by an employee: on behalf of the employer: with prior permission: goods and services to be used in business
Circumstances
A credit or charge card in the employer's name is used by an employee on behalf of the employer to purchase goods or services to be used in the business. It is clear that the purchase is made in the employer's name.

Class 1 NICs
No

PAYE
No

Enter on P11D
No

Class 1A NICs
No

Enter on P9D
No

Further information
Vouchers and credit tokens and NIM02090

It will be clear that the purchase is made in the employer's name where the employer has given authority in advance to make the purchase, the employee explained in advance of the contract being made and the supplier accepted that the purchase was made on the employer's behalf"

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By Anonymous
24th Jun 2008 12:41

The F Word
Following on from anon's posting, that really only leaves travelling expenses and entertainment as the two main reportable items for many Pams.

Neil Wilson's view, in various threads over the years, is that if subsistence (alcohol included) is part of a journey then it is allowable as part of a travelling expense (although not for sole-traders or partnerships because of the "eat to work" case law - employees/directors only). I have one particular Pam who stretches this to the limit by taking a train to business meetings in London and dining at Gordon Ramsay's. But to restrict or disallow that subsistence would be akin to asking her to travel second class on the train.

For local meals etc, which are prima-facie entertainment, switched-on Pams can be wise to the idea that if their lunch-meeting had a specific purpose such as discussing a particular issue with a customer/prospect/sub-contractor or even just to reinforce an existing relationship with a contact then the lunch expenses are s336 allowable.

All a bit liberal perhaps, and arbitrary; but Pam has access to the internet and can look up the EIM pages for herself. One of my Pams subscribes to an expensive tax-tips publication that gives her the inside track on such nebulous matters, and is prone to lecturing me on the finer points.

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By Anonymous
24th Jun 2008 10:51

See EIM 01110
http://www.hmrc.gov.uk/manuals/eimanual/EIM01110.htm

"Businesses are often run in such a way that employees make payments on their employer's behalf. For example an employee may buy stamps for the employer and be paid from petty cash. This transaction is outside the scope of Section 62 and Section 72: the employee has received no money of his own on which we could make such a charge".

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24th Jun 2008 03:20

"the company's goods and services do not require reporting"
Nichola
Despite many pages of HMRC advice available very little of it seems useful in completing a P11D. You say "the company's goods and services do not require reporting."
Everytime I have asked HMRC staff about this I am told that any payments that are not covered by a dispensation have to be entered on a P11D. Some clients have a large number of payments made by directors personally for company expenses and each transaction has to be reviewed to see whether it falls within a dispensation. It would appear to be much more sensible to allow a dispensation for any payments that are not taxable if the employer's policy identifies any taxable payments when made.
Everytime I have asked HMRC staff about payments using company credit cards I have been told that these have to be included on P11Ds. The next question is: Where? The P11D guide is not much help. When you look at "C Vouchers and credit cards" it says:
"Enter the total of:
• the cost to you of providing any vouchers (including season tickets) which can be exchanged for money, goods or services
• any extra cost to you in providing the money, goods or services for which the vouchers are exchanged
• all expenses and other payments met by credit cards you provided, except
– expenses directly in connection with the car(s) at section F
– expenses more appropriate to Section N. Do not include any vouchers, such as cash
vouchers, which have suffered tax under PAYE (see part B above)."

What does "expenses more appropriate to Section N" mean? Why don't they explain what is more appropriate?
Nichola
Can you provide any references that I can use in deciding what to tell my clients? I shouldn't be in the position of having to choose between what a well respected tax expert says on the internet and what I get told every time I query it with HMRC staff - despite what we know about their lack of knowledge.

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24th Jun 2008 10:24

P11D a pain
Let's face it, dealing with these wretched forms is an extremely unpopular job, and I think that's because we know that you have to spend an inordinate amount of time to get hold of the information, if you do it by the book, and you end up with a set of figures that is not going to produce any tax charge at all.

So why bother? I think we take a practical approach by ignoring the very strict application of the rules, such as excluding reimbursements when the expense was paid for out of the director's own pocket, for company goods and services (although the Revenue expense booklet tells you to report all expense payments, and this seems to cover anything paid by the company, or reimbursed to the director).

I don' think a tax officer carrying out an inspection is going to be interested in anything that doesn't look like a benefit in kind, whatever the book says. Does anyone have a different experience?

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By Anonymous
23rd Jun 2008 17:42

I guess I'm a 'Pam' -
I think I have a dispensation but honestly can't remember. My company has been running for about 15 years, in the middle of which I spent over a year out of the country (with the company not trading) and have moved house, registered office, and have switched tax office at least twice. I never have anything to put on the P11D. I pay a lot of company expenses including travel/subsistence, postage, consumables, whatever, out of my own pocket (in fact it works out as the vast majority of the company's outgoings), but then do a reconciliation at the end of each quarter when doing the VAT - and the company pays me a cheque for all the expenses that I paid. Other than salary and dividends, at no time does the company actually pay me for anything which I have not already used my own personal money for. Many years ago I used to have a petty cash float, but it got complicated keeping company money and private money separate, so now I just reclaim what I can from the company, based on receipts.

If I don't have a receipt or at least a note of what I have spent for the company, then I don't claim it. One of the biggest of such items is car mileage: it's too much hassle to record so I never claim any. So, over the years the company has probably overpaid a significant amount in corporation tax, since these unclaimed expenses have inflated its apparent profit.

If HMRC were to decide to play hardball and insist on my recording everything, I would make sure I did - and they would collect a lot less tax from my company.

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23rd Jun 2008 16:51

Just to confirm
In 2008, I have made about 10 dispensation applications, of which 4 related to 1 man director companies. All have been granted.

This contrasts with the old dispensation form, which I struggled to be successful for even multi director companies. Providing copies of expense sheets - all thankfully in the past. It sounds like the usual inconsistency of the various Revenue offices.

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23rd Jun 2008 15:32

Dipensations
Interesting to hear from "Richard" that dispensations have been easier to obtain for "1 man" companies in recent years as that's certainly not the case with Sussex Area. As a matter of course we used to apply for a dispensation for all clients and these were approved without question. However, more recently, following the merger of of local tax offices, we find it is now almost impossible to get a dispensation for a new "1 man" company and even after such a company has been trading for some time, the powers that be still require a huge amount of information, including all receipts for the last 12 months. If something is then found to have been missed from the previous years P11d this can lead to a refusal of the dispensation, even if there has been no loss ok tax/NI.

I have argued long and hard with our local "keeper of the kings gold" that granting a dispensation only covers items that are allowable for tax and NI, mainly travel and such related expenses, and that if items are not allowed they should still be included on a P11d. If they are overlooked, he can still arrange a PAYE inspection at which time any tax/NI/penalties would be imposed. He just can't grasp that granting a dispensation doesn't remove the need to report certain items, it will not necessarily be abused, it won't result in large tax/NI underpayments, and it just saves a lot of time dealing with trivia. I'm sure he would be horrified to learn from readers comments that in the absence of dispensations, businesses are simply not bothering with P11ds, I can almost hear him spluttering over his coffee at that!

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23rd Jun 2008 14:58

P11Ds and dispensation
It can be clearly seen from the comments posted that even us well trained intelligent professionals have no idea what should and should not be reported on these blessed forms! What chance do company owners have of getting it right.

Last time I applied for a dispensation for a one man band company HMRC told me that it would only be granted if someone other than the owner was checking all claims, i.e. us! No thanks, not having that responsibility unless the fee is sufficient which unfortunately it wasn't.

How did other people get around this?

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By Anonymous
23rd Jun 2008 14:52

Directors Current Account
We have owned managed Ltd Co's who do incur business expenses personally and sporadically reimburse themselves. No dispensation is usually in place and no P11D's are completed on the basis of no tax effect. I'm sure many ICAEW accountants have similar views, judging by the comments and from new clients obtained from other ICAEW firms.

Does it make any difference if the Director's current account carries a large credit balance? The point being that it could be argued that expenses are not reimbursed therefore not reportable - any 'reimbursement' could be repaying b/fwd DCA balances?

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23rd Jun 2008 14:23

Reporting to HMRC
As a small owner managed company, with a P11D dispensation, my understanding is that all expenses that don't fall under the dispensation are reportable, if paid for personally. Having gone on the P11D these seem to end up on the employee's tax code until such time as they either submit a tax return (where they claim for the expenses) or file a P87 (which has replaced the s198 claim). This is what happened to us last tax year (2006/07). To be honest, as none of our employees have any expenses which incur tax or NI it is frustrating that the P11D form does not allow the employer to tick a box to confirm that the expenses will not fall liable for tax/NI and save the employee and HMRC a lost of wasted effort in changing tax codes unnecessarily.

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By 1381129
23rd Jun 2008 14:00

P11D with no payroll
I have read somewhere that P11Ds are due even when there is no payroll; the tax reference to be used is the CT reference. Can anybody confirm this?

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By Anonymous
23rd Jun 2008 13:16

P11D
Following on from Steven Barker's comment, we have been informed by the Revenue that even if a company credit card has been used, this is reportable.
The basis is that there is not sufficient control.
I am sure you will all agree that this is bureaucratic nonsense.

The Revenue refusing a dispensation for one-man companies is not unusual.

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23rd Jun 2008 12:55

P11D required
I was under the impression that all reimbursements to a director should be reported, even for the company's goods and services. I'm glad to hear that this isn't necessary.

And I think there must be a lot of directors out there who draw less than the lower NI level, so do not need to complete a P14; in fact they don't have a PAYE scheme in existence. That means no reminders about P11D(b)s, or P11Ds, in fact a quiet life. If you did want to file a P11D, you don't have a reference to be able to do so, or a tax office to send it to.

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23rd Jun 2008 12:51

Company Credit Card
Do you agree that had Pam paid for her expenses on a Company credit card (i.e. the money never really passed into her hands), that this would then avoid the need to put this on a P11D ?

When a friend and I had a small Ltd Co between us a few years ago, we were denied a dispensation as the Revenue said that there was no independent authorising process for the expenses (or something along those lines), i.e. our expenses were not being checked by a higher authority in the company.

Do you need to do the s.198 letter (or is it now s.336 ?) or can you wait and put the claim just on the tax return ?

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23rd Jun 2008 12:49

Dispensation

I have lots of small ltd co clients who would fall into this regime, and I automatically put in a dispensation. HMRC have made the process a lot easier over the last couple of years, and now only knock them back if the employer has insufficient PAYE history.

FTR, if Pam was a client, and no dispensation was in place, I would still not do it - it is a pointless exercise, and as Nichola mentioned, there is no tax at stake. For anyone who thinks this is reckless, ALL of the ltd co clients I have picked up from other accountants (most of whom are ICAEW) also fall foul (no dispensation, but no P11D either). The point I'm making is that it's not just me.

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By Anonymous
23rd Jun 2008 11:05

Yes, but
I would hope that this would only be in extreme circumstances - i.e. you take on a client who then point blank refuses to comply. Pretty unlikely to happen, but then again, you never know.

Most clients will, when they are aware that they are not doing what they should, will apply for a dispensation (preferable) or file a P11D.

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22nd Jun 2008 13:07

Money Laundering
Would Pam's failure to submit a P11D result in the advisor having to submit a Money Laundering report to NCIS?

I was looking at David Winch's various ML articles where he suggests as a rule of thumb that if the consequence is a penalty, the failure is likely to be civil offense rather than a criminal one (which result in fines) - And so far every text I've looked at talks about penalties rather than fines for NI compliance failures.

Thanks,

Greg

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