COMPLIANCE
Reporting benefits and expenses
The CIPP policy and research team provide commentary, information and guidance on this important function and duty of employers
P ayroll professionals will always admit that although the introduction of reporting pay as you earn (PAYE) data electronically via real time information has made tax year-end less laborious than it once was, the event still brings with it a variety of tasks that need to be completed, both accurately and on time, to tight deadlines. Ahead of the 6 July deadline for reporting benefits provided in tax year 2020/21, it felt appropriate to provide a high-level overview of the key aspects of P11D returns and to explore different methods that can be used to report taxable benefits. P11D returns One of the biggest most significant activities following year-end is the production and submission of P11D returns. A separate P11D needs to be completed for each employee or director who has been provided with a benefit, or benefits in kind, so that they can be
reported to HM Revenue & Customs (HMRC). Benefits in kind are items or services that employees receive from their employer in addition to their salary and are commonly referred to as ‘perks’ (from the word perquisites). Some examples include private healthcare, company cars and interest-free or low-interest loans. Any expenses payments, benefits or facilities provided to members of the director’s or employee’s family or household must also be included in the P11D return. A P11D return is not required for any individual who has not received taxable expenses or benefits within the relevant tax year. Additionally, if an employer has opted to process certain expenses and benefits through payroll software, there is no requirement to include them in a P11D return. (Note that not all benefits can be payrolled, and this is discussed later.) All P11D returns are required to show the employer’s PAYE reference, along
with personal details of the employee, including: name; National Insurance number; date of birth (if known); and gender. Information and cash equivalent values relating to all expenses and benefits provided in the tax year are to be reported. The data reported are considered when HMRC generates an employee’s tax code and reflected in coding notices sent to both employee and employer. The deadline for submitting P11D returns to HMRC is 6 July following the tax year being reported. Employees must be given a copy of the information their employer is supplying to HMRC, by the same date. An employer failing to make a P11D return within the appropriate time limit may incur a penalty not exceeding £300, with a further penalty not exceeding £60 a day if the failure continues. If the employer makes an incorrect P11D return a maximum penalty of £3,000 per return can be imposed. It is mandatory for employers to retain a record of all expenses and benefits provided to employees. This can include, but is not limited to, records of payments that an employee makes towards an expense or benefit, details
...considered when HMRC generates an employee’s tax code and reflected in coding notices sent to both employee and employer.
| Professional in Payroll, Pensions and Reward | June 2021 | Issue 71 26
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