Reporting of expenses and benefits

Fri 01 May 2015

Now that the 2014/15 tax year has passed, it is important to ensure that the expenses and benefits provided to your employees during the 2014/15 tax year are reported to HM Revenue & Customs (HMRC) accurately and by the due dates to avoid late filing penalties and an interest charge accruing for the late payment of liabilities. Furthermore, we have seen HMRC take much more interest in this area in recent years.

Forms P11D – Expenses reimbursed or benefits provided ‎to an employee should be reported on a form P11D and submitted to HMRC by 6 July.  There a number of nuances that, in our experience, HMRC are likely to challenge during an employer compliance review.  You will need to be aware of these and ensure that you are accurately reporting benefits for tax purposes as well as for NICs, e.g. which benefits attract Class 1 NICs and which attract Class 1 A NICs.

You may wish to review your P11D reporting dispensation (‘dispensation’) to ensure it covers all the expenses you pay, as this can reduce the number of items you need to report.  If you don’t already have one in place, you have the administrative burden of reporting all expenses and benefits, and then requiring your employee to claim tax relief on the business element via the self assessment tax return process. ‎You can still apply for a dispensation.

Also take this opportunity to review how you treat certain items, are you being too prudent?

PAYE Settlement Agreement (PSA) – As an employer, you may have entered into an annual PSA with HMRC. A PSA allows you settle the tax and NIC liability on behalf of your employees on impractical, irregular and minor items which are not attributable to one individual e.g. staff entertainment – it’s not a ‘catch all’ where you haven’t reported benefits, expenses, and/or cash payments correctly during the year. Please note that the liability is calculated on a grossed up basis and if you are being too prudent, then this is not cost effective.

You will need to submit the calculations of the liability to HMRC by 31 July or 31 August with the payment due by 19 October. If you do not have a PSA in place, you have until 6 July to agree this.

Taxed Award Scheme (TAS) – If you provide benefits or awards to employees of third parties as an incentive, then you will need to report the tax (and possibly NIC) to HMRC under a TAS. You have until 6 July to agree this with HMRC.

Tax calendar – download our Tax Calendar which provides you with the important employment tax compliance dates that you need to be aware of for the current, 2015/16, tax year.

Click here to find out more about our employment tax services and contacts.

Author: Vaneeta Khurana