Contractor expenses – what is the P11D form?

Form P11D details the cash equivalent of benefits and expenses UK-based employers have provided to company directors and employees in a given tax year. It’s a statutory form required by HMRC and has to be submitted annually.

Recent changes aim to simplify the process although the form itself still has numerous sections and sub-sections that need to be completed. You can submit your form as a hard copy by post or online by using the HMRC portal.

In this article, we’ll look at who has to fill in a P11D and what kind of information you should include in the form. Your accountant is likely to fill in and submit your company’s payroll forms on your behalf, but we recommend that you read on, as a company’s directors are ultimately responsible for the accuracy of all tax-related submissions to HMRC.

Who has to file a P11D?

If you’re a company director or employee, you’ll have to complete an annual statement about any expenses and benefits in kind payments you have received during the previous tax. You’ll also have to include any benefits, expenses or facilities you’ve provided to members of a director’s ‘family or household’ (see HMRC Expenses and Benefits Guide booklet 480 paragraph 1.22. for more guidance).

The P11D form has to be completed by your limited company. A separate form P11D should be completed for individual directors or relevant employees and the information shared with them before the form is submitted.

When you don’t need a form P11D

Since April 2016, companies have been able to collect tax on benefits provided to employees via the payroll (see below). If your expenses and/or benefits have been taxed in this way, or if you have no taxable benefits or expenses for the year – unlikely for a contractor – you won’t have to submit a statement.

What sort of benefits and expenses are included?

Some typical employee benefits that will need to be reported on a P11D include:

• Company cars and fuel including mileage allowance
• Company van provided for personal use
• Private medical insurance including dental expenses
• Subscriptions to professional organisations and professional fees
• Payments for use of home telephone
• Interest-free loans
• Assets or facilities placed at the employee’s disposal and with a clear personal benefit (see below)
• Employer supported childcare, childcare costs
• Credit card expenses payments
• Staff entertaining if the amount is more than £150 per employee
• Relocation expenses, payments and benefits

The list above is not exhaustive and exemptions may also apply.

Benefits in kind and the payroll

As stated above, since April 2016, tax on some benefits in kind provided to directors or employees can be dealt with by payroll. Eventually, all benefits may be taxed via PAYE but at present, the system is still fairly limited. Using payroll to tax benefits will not only ease the annual accounting burden of completing a P11D form, you’ll also cut the risk of incurring a fine for missing the submission deadline.

Don’t miss the P11D deadline!

The deadline for sending your P11D form to HMRC is by no later than 6th July of the relevant tax year and it’s definitely a date you don’t want to miss! If you miss the 6th July deadline, HMRC will issue a single reminder and you’ll have until 19th July to submit the form. After four months, you’ll receive a penalty notice and you’ll have to pay a £400 fine.

Your P11D checklist

Before filling in your form, make sure you have the following information to hand:

• Your employer reference number
• The employee or director’s name, date of birth and national insurance number
• Full details of the expense or benefit, such as the price of a company vehicle, the cash equivalent of fuel, the sum of a loan provided or the amount paid for medical insurance.

Assets made available for employees to use

Since April 2017, employees are now taxed on company assets made available to them for private use on a pro-rata basis. This is a change from the previous system whereby usage was taxed on the basis of the asset being available to them for the whole year, even if this wasn’t the case. It’s important to note, this only applies to those assets where there is no transfer of ownership.

P11D exemptions

Business travel, business dinners or entertainment expenses, team-building outings, uniforms, and expenses covered by a PAYE settlement, don’t need to be included on your annual statement, as these are exempted. If you’re unsure about what qualifies, always check first with HMRC.

Further information

The rules and regulation that apply to P11D are fairly complex although recent changes have helped to make the system easier to use. For further information, see HMRC’s P11D Guide 2017 to 2018.