Since the abolition of P11D dispensation agreements for the 2016/17 tax year onwards, the reporting obligations for those employers that previously did not hold a P11D dispensation have been significantly reduced. A dispensation previously removed the requirement to report reimbursements of specified business expenses to employees. However, only employers holding such agreements were excused from reporting these specified expenses.
General exemption from reporting certain employee expenses
Since 6 April 2016, dispensations have been replaced by a general expense exemption which removes the requirement to report business expenses, so that employers are now only required to report taxable benefits and certain expenses provided to their employees.
Employers that agreed bespoke reimbursement rates for particular expenses within their dispensation during the period 6 April 2011 to 5 April 2016 can continue to benefit from using these rates (rather than applying the exemption) for up to five years from the date they were agreed.
Avoid penalties through online reporting
More and more employers now complete their P11D reporting requirements online. There are numerous benefits of completing this reporting online; the paramount of which for employers being the electronic confirmation that HMRC has received their submission. In addition, the online system has been programmed to check for common errors, thereby reducing the likelihood of the employer’s submission being rejected. This facility may protect the employer from exposure to penalties which may apply if paper, rather than online, returns are used.
Payrolling of taxable employee benefits
From 6 April 2016, employers are also able to formally payroll most taxable benefits, provided they register with HMRC prior to the start of the tax year. If this service is used, no forms P11D are required to be prepared for the specified benefits; however, a form P11D(b) employer declaration is still required to account for Class 1A NIC. Employers that successfully registered and payrolled the appropriate benefits throughout the year are still obliged to provide their employees with a statement highlighting the benefits that have been payrolled, so that they can utilise this when completing their personal tax returns.
If an employer failed to formally register with HMRC before the start of the tax year but continued to payroll benefits for 2016/17, it will still have to prepare and submit forms P11D and P11D(b) by 6 July 2017.
The changes surrounding P11D reporting are ever evolving and we wait to see the further impact should any changes result from the ongoing call for evidence from HMRC regarding employee expenses.