Tag: P11D

Payroll Year End 2017 – What about P11D’s?

By now you will have already processed your payroll year end and submitted the final RTI submissions.

You have to pay your PAYE by 19th April and issue P60’s by 31st May.

So the next main date is P11D Benefits in Kind! due by 6th July

Last year Dispensations ended and Payrolling Benefits became an option but you must be registered

If you choose to payroll you can tell HM Revenue and Customs (HMRC) online. You need to register online before the start of the tax year you want to payroll for.

You must add the cash equivalent of the employees’ benefits to their pay and then tax them through your payroll.

HMRC will make sure the value of the benefit is not included in your employees’ tax codes.

If you use the service you:

  • won’t need to use form P11D
  • still need to work out the Class 1A National Insurance contributions on benefits and complete form P11D(b)

You can exclude employees from payrolling once you’re registered, but you’ll need to send a P11D to declare the non-payrolled benefits.

Once the tax year has started you’ll have to payroll the benefits for the whole of the tax year, or until you stop providing them.

https://www.gov.uk/guidance/paying-your-employees-expenses-and-benefits-through-your-payroll

Many businesses will continue to submit P11D’s

At the end of the tax year you’ll usually need to submit a P11D form to HM Revenue and Customs (HMRC) for each employee you’ve provided with expenses or benefits.

You’ll also need to submit a P11D(b) form if:

  • you’ve submitted any P11D forms
  • you’ve paid employees’ expenses or benefits through your payroll
  • HMRC have asked you to – either by sending you a form or an email

Your P11D(b) tells HMRC how much Class 1A National Insurance you need to pay on all the expenses and benefits you’ve provided.

If HMRC have asked you to submit a P11D(b), you can tell them you don’t owe Class 1A National Insurance by completing a declaration.

https://www.gov.uk/employer-reporting-expenses-benefits/reporting-and-paying

Expenses covered by an exemption

You don’t have to report certain business expenses and benefits like:

  • business travel
  • phone bills
  • business entertainment expenses
  • uniform and tools for work

To qualify for an exemption, you must be either be:

  • paying a flat rate to your employee as part of their earnings – this must be either a benchmark rate or a special (‘bespoke’) rate approved by HMRC
  • paying back the employee’s actual costs

steve@bicknells.net

Are you ready for the changes to employee expenses?

Pay for woman.

From April 2016 all employee expense Dispensations agreed with HMRC will cease to apply!

You will need new systems for checking expenses, HMRC will be supply examples.

Expenses which are not covered by benchmark scale rates are likely to paid and taxed via the payroll with the employee claiming relief through P87 and Self Assessment SA100.

Expenses

Are you ready for the new regime?

steve@bicknells.net

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It’s a Pool Car isn’t it?

Black Elegant Vintage Car

Yet again, we have another case on Pool Cars which could have been prevented had the right procedures been put in place.

The Case was decided in May 2015 and involved Mark and Trudie Holmes and their company KMS Logistics (UK) Ltd. The company owned 7 prestige cars which were used assist in maintaining and attracting clients.

There was no prohibition (not even a verbal one) on the private use of the vehicles, mileage logs showed that the cars were mainly used by Mr & Mrs Holmes. Until 2003/4 they had been declared as a benefit in kind but then the stopped being declared! There even seemed to be confusion over who owned the cars.

So not surprising Mr & Mrs Holmes lost the case.

Read the full details by clicking here

So what should you do to prove there is no private use:

  1. Keep the car on the company’s business premises
  2. Keep the keys at the company’s business premises
  3. Prepare a Board Minute
  4. Make sure your contract of employment bans private use
  5. Keep a mileage log
  6. Insure the car principally for business use

HMRC have specific rules on keeping vehicles at home in EIM23465

Even if you do meet the 60% rule you still have to prove ‘no private use’

steve@bicknells.net

 

 

What are Dispensations and Scale Rate Allowances?

Pay

Its nearly time to prepare your P11D’s, here is a link to the 2014-15 P11D

You’ll need to submit an end-of-year form to HM Revenue and Customs (HMRC) for each employee you’ve provided with expenses or benefits.

The form will either be a P9D or a P11D, depending on the expense or benefit.

You may need to submit form P11D(b) to report the amount of Class 1A National Insurance due on all the expenses and benefits you’ve provided. You should do this if:

  • you’ve submitted any P11D forms
  • you’ve been sent a P11D(b) form by HMRC

If you don’t submit any P11D forms, you can tell HMRC that you don’t owe Class 1A National Insurance by completing a declaration.

Due by 6th July 2015.

As an employer, you can apply for a dispensation on some expenses and benefits you provide for your employees. This means you won’t need to report them to HM Revenue and Customs or pay tax or National Insurance on them. Here is a link to apply for Dispensations.

There are also Benchmark Scale Rates which can be paid tax free, alternative you can claim the actual costs

Description Amount (up to)
Breakfast rate £5
One meal (5 hour) rate £5
Two meal (10 hour) rate £10
Late evening meal rate £15

steve@bicknells.net

The Yacht that wasn’t a benefit in kind

Yacht de luxe.

This is the case of Gillian Rockall v HMRC (2014) HKFTT 643.

Mr Michael & Mrs Gillian Rockall were involved in running a hotel and conference centre and providing high-end residential courses, amongst the companies assets was a 140 foot ocean-going yacht costing $11.9 million called Masquerade of Sole.

HMRC issued assessments on Mr & Mrs Rockall for the tax years 2000-2001 to 2008-2009 on the basis of personal use (benefit is normally assessed as 20% of the market value).

The Yacht was used for:

  • Business Networking
  • Customer Training
  • Exploring Business Opportunities in the Caribbean and Mediterranean
  • Friends and Acquaintances were taken on occassional trips to provide a opinion on opportunities

The Yacht was also placed with an agent for charter when not required for the purposes above.

The First-Tier Tribunal took the view that the use of the Yacht was only for Business and not for private purposes.

However under S203 ITEPA 2003 a benefit in kind would arise because the asset was at the disposal of the employees.

The Rockalls appealed to the First-Tier Tax Tribunal, on the grounds that the use of the yacht was tax-deductible under s365 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA). This requires that the item comprising the benefit in kind was used ‘wholly, exclusively and necessarily in the performance of the duties of the employment’.

The tribunal has now ruled that the yacht was bought and operated purely for business purposes and thus was fully tax-deductible for both the Rockalls.

– See more at: http://www.step.org/yacht-used-impress-customers-were-legitimate-expense#sthash.dNRhVYmG.dpuf

steve@bicknells.net

15 Brilliant Tax Free Benefits in Kind

Tax Free Bags Represent Duty Exempt Discounts

It’s P11D time, but have you considered giving your employees benefits in kind that are tax free, here are some to choose from:

  1. Pensions – Up to £40k can be paid in to you pension schemem by your employer (2014/15)  and you can use carry forward to pay in even more
  2. Childcare – Up to £55 per week but check the rules to makesure your childcare complies (HMRC Leaflet IR115)
  3. Mobile Phone – One per employee
  4. Lunch – Tax Free Lunch Blog
  5. Cycle Schemes – Cycle to Work Blog
  6. Fitness – Fitness Blog
  7. Parties and Gifts – Christmas Blog
  8. Parking – Parking Blog
  9. Business Mileage Allowance – 45p for the first 10,000 miles then 25p
  10. Long Service Award – A bit restrictive as you need 20 years service, the tax free amount is £50 x the number of years
  11. Eye Tests and Spectacles – The Eye Test must be needed under the Health & Safety at Work Act
  12. Suggestion Schemes – Suggestion Scheme Blog
  13. Insurance such and Death in Service and Income Protection – Medical Insurance Blog
  14. Travel Expenses – Travel Blog
  15. Working From Home – Working from Home Blog

steve@bicknells.net

P11D – should the employee pay NI on Private School Fees

Schoolchild writting on blackboard.

As with so many tax issues, the paperwork will determine the answer.

Let’s assume your childs school fees are £10,000 a year that means you will need to earn £17,241 per year (based on paying 40% tax and 2% NI) over 10 years that’s £172,414 per child, that’s a lot of fees.

So its no surprise that some parents ask their employer to pay the bill and try to save the employees NI but this can go badly wrong as demonstrated in Ableway Ltd v IRC SpC 294….

Mr W and his wife B were directors and major shareholders of Ableway Ltd. The company’s registered office was the home address of W and B. They arranged for the company to pay their two sons’ school fees, although in an undated letter, they undertook to pay the fees in the event of the company failing to do so.

The Revenue argued that the liability belonged to W and B, and that they had accepted this liability by signing the school entry form. Furthermore, the discharge by an employer of an employee’s pecuniary liability was earnings. The school bursar also confirmed that the parents were liable to pay the fees. He said that the invoice was sent to the person responsible for the fees, but that the parents remained liable to pay them. In the event that the school ever had to take action to recover payment of fees, it would sue the parents, relying on the signed entry form and signed deposit form.

HMRC have guidance on the following situations:

Basically if the company contracts directly with the school and the school confirms in writing that the company is responsible for all fees in all circumstances then the employee will not have to pay employees NI.

This is explained clearly by Indicator – Paying for Education

This saves the employee the 2% NI in our earlier example.

Another idea from Indicator is to have the benefit against the spouse with the lowest tax rate.

steve@bicknells.net

 

 

 

 

What can you include in a PAYE Settlement Agreement (PSA P626)?

Businessman looking at a small present with a magnifying glass

 

 

PAYE Settlement Agreements (PSA’s) are requested by Employers and subject to agreement with HMRC. Under this agreement the employer will be responsible for accounting for any tax and national insurance liabilities arising. Any items covered by a PSA will not need to be shown on forms P35 and P11D at the end of the tax year.

 

 

Applications for PSA’s should be made before 6th July 2013 if you want to use them for the tax year ended 5th April 2013, once approved by HMRC payment of the Tax and NI is due by the 19th October (payments by cheque) or 22nd October (payments online).

The tax due is grossed-up at the employee’s marginal rate. For example, £5,000 of benefits provided to higher rate taxpayers (40 per cent) would be grossed-up as follows:

Benefits of £5,000 x 40 per cent = £2,000 tax

Grossed-up tax = £2,000 x 100/100-40 = £3,333.33

Benefits plus grossed-up tax = £8,333.33 x 13.8 per cent Class 1B = £1,149.99

Total due to be paid £3,333.33 tax plus £1,149.99 Class 1B = £4,483.32

.
PAYE Settlement Agreements can only be created for:

 

Minor Benefits

HMRC (PSA1060) examples (not exhaustive) of what may constitute a minor item.

  • incentive awards
  • reimbursement of late night taxi fares outside s248 ITEPA 2003
  • personal incidental expenses in excess of the statutory daily limit
  • present for an employee in hospital
  • staff entertainment, for example a ticket for Wimbledon
  • use of a pool car where the conditions for tax exemption are not satisfied
  • subscriptions to gyms, sports clubs etc
  • telephone bills
  • gift vouchers and small gifts

Irregular Expenses

HMRC (PSA 1070) examples (not exhaustive) of what may constitute an irregular item.

  • relocation expenses where the amounts concerned exceed the £8000 tax exempt threshold (Section 287 ITEPA 2003)
  • occasional attendance at an overseas conference where not all the expenses qualify for relief
  • expenses of a spouse occasionally accompanying an employee abroad
  • occasional use of a company holiday flat
  • one off gifts which are not minor.

Impracticable Items

HMRC (PSA 1080) examples (not exhaustive) of what may constitute an impracticable item

  • free chiropody care
  • hairdressing services
  • Christmas parties and similar entertainment provided by the employer which do not already qualify for relief
  • cost of shared taxis home which do not satisfy s248 ITEPA 2003
  • shared cars.

Gov.uk has guidance on How to get a PSA

steve@bicknells.net

 

Private Medical Insurance – Tax Facts

3d rendered illustration - runner anatomy

 

Private Medical Insurance accounts for 21% of the value of all benefits in kind and 60% of employees with benefits have Private Medical Insurance, based on HMRC statistics.

HMRC have an A to Z list of benefits and expenses which gives guidance on most benefits and Helpsheet 207 which provides details of non-taxable benefits.

 

 

But did you know some medical benefits are tax free:

  1. Periodic medical check-ups or health screenings (maximum of one per tax year)
  2. Eye tests required under health and safety legislation and the cost of corrective glasses or contact lenses
  3. Medical treatment provided outside the UK when the employee is working overeseas
  4. Medical treatment or insurance solely related to injuries or diseases arising from the employee’s work
  5. Welfare Counselling

If you do have Private Medical Insurance provided by your employer it will be reported on the P11D in Section I (if you are not a Director or earn below £8,500 (P9D employees) Private Medical Insurance is not taxable).

Simply Health have produced a Fact Sheet which sets out the tax implications of:

  • Private Medical Insurance (PMI)
  • Health Cash Plan
  • Cost Plus Insurance Plan
  • Healthcare Trust
  • Scheme Agreement

The Fact Sheet shows the tax for both basic and higher rate taxpayers and the Employers NI.

The Money Advice Service sets out some of the Pros and Cons of PMI:

Pros

  • Specialist referrals. You can ask your GP to refer you to an expert or specialist working privately to get a second opinion or specialist treatment.
  • Get the scans you want. If the NHS delays a scan, or won’t let you have one, you can use your cover to pay for it.
  • Reduce the waiting time. You can use your insurance to reduce the time you spend waiting for NHS treatment, if your wait time is more than six weeks.
  • Choose your surgeon and hospital. You can (in theory) choose a surgeon and hospital to suit your time and place – which isn’t possible on the NHS.
  • Get a private room. You can use it to get a private room, rather than staying in an open ward which might be mixed-sex.
  • Specialist drugs and treatments may be available. Some specialist drugs and treatments aren’t available on the NHS because they’re too expensive or not approved by the National Institute for Health and Clinical Excellence in England and Wales (NICE) or the Scottish Medicines Consortium (SMC).
  • Physiotherapy. You get quicker access to physiotherapy sessions if you have insurance than you would through NHS treatment.

Cons

  • You might get better care on the NHS. If you have a serious illness such as cancer, heart disease or stroke, you’ll get priority NHS treatment. NHS hospitals can be as good as or better than private hospitals.
  • It’s expensive – and the price will go up. A typical family premium (two adults in their 40s and two children under 10) can vary from £700 to £1,650 per year. Premiums will rise every year, and with age – so by the time you’re older, and more likely to need hospital treatment, you may not be able to afford it.
  • Chronic illnesses aren’t usually covered. Most policies don’t cover chronic illnesses which are incurable, such as diabetes and some cancers.
  • There may not be any local treatment options. If you choose a policy with an approved list of consultants and hospitals this may not include the expert consultant you want to see or a convenient location for treatment.

As an alternative to PMI, I think it might be worth looking at Insurance Policies that are tax free such as Income Protection, the following is an example from Willis Insurance:

Group Income Protection pays a proportion of employee’s salary if they are off work due to accident or illness for a prolonged period.

Group Income Protection can be set up with a deferred period of 13, 26, 28, 41, 52 and 104 weeks. The longer the deferred period the lower the premium will be.   Typically the cost of providing Group Income Protection is usually between 0.5% -1.5% of payroll but largely depends on the type of business.

The premiums for the policy enjoy tax relief on contributions and no Benefit In Kind Tax

Employers could then support employees by paying for specific health care as necessary, the employees would then only be taxed on the care that they required.

steve@bicknells.net

Payroll Year End – how to stay in control

Tax week 51 starts n Monday 19th March, so there are only 2 weeks till tax year end. For many Payroll Year End brings on feelings of dread and fear, the panic of closing off, printing P60’s, clearing payroll history, re-setting tax codes, tax rates, NI rates, but with a bit of planning and preparation it doesn’t need to be scary.

Here is a quick summary and timetable:

  1. Register online with HMRC https://online.hmrc.gov.uk/registration/organisation
  2. Order your P60’s (including some spares, just in case), you can get them free from HMRC http://www.hmrc.gov.uk/paye/forms-publications/onlineorder.htm
  3. Run your year end payslips as normal and print the P32, check what you have paid against P32 amounts
  4. Print the P11 Workings for PAYE and NI, makesure they are complete, no missed weeks, run some test calculations to double check the answers
  5. Print your P60’s and check them against the Payslips (these have to be issued to current employees by 31st May, but why wait till then? also employees that have left before year end get P45’s they don’t get a P60)
  6. Produce your P35 Employers Return and P14’s (these have the same details at the P60) – due by 19th May but you might as well prepare these when you run the final payslips
  7. Take back ups, print file copies
  8. Whether you use HMRC Basic PAYE Tools or commercial software like Sage, you will have been sent an update for the new tax year, basically, this will help you reset the Tax and NI Bands and change the basic tax code, starting the new tax year should also mean that the history is cleared
  9. HMRC will also have sent you new coding notices to start in the new tax year
  10. When you process your first period in the new tax year carryout your own test calculations on several employees to make sure the answers are correct, it better to deal with problems in the first period than have to roll back or start again later
  11. By the 6th July you will need to do you P11D’s for Benefits in Kind, but there is plenty of time for that

HMRC have a checklist and timetable available at http://www.hmrc.gov.uk/paye/payroll/year-end/checklist.htm

steve@bicknells.net