Reporting and paying employee expenses and benefits

The deadline for P11D forms for employee expenses and benefits is July 2022 and there are various rules for different expenses.

If you are a business owner, you will know that you must submit a P11D form to HMRC for each employee you have provided with expenses or benefits by 6 July following the end of the relevant tax year.

6 July is also when you need to have provided your employees with a copy of the information on your forms by, and told HMRC the total amount of Class 1A National Insurance contributions (NIC) you need to pay on all the expenses and benefits you have provided with form P11D(b). Payment of NICs owed on expenses or benefits is due on 22 July.

There are many types of expenses and benefits that you need to include on your P11D. Others are exempt, so they do not have an impact. Here is an overview of the basic rules for the most common types of expenses.

Company cars

As an employer, if you provide company cars or fuel for your employees’ private use, you will have to work out the taxable value so you can report it to HMRC. ‘Private use’ includes commutes to and from work, unless they are travelling to a temporary place of work.

It is a common misconception that the taxable value of a car is the same as its cost. However, that is not the case. Instead, the taxable value depends on the car’s fuel type and level of CO2 emissions, as well as the amount of time the car is unavailable during the tax year.

The simplest way to work out yours is to use commercial payroll software or HMRC’s company car and car fuel benefit calculator.

You can work out the value manually on P11D working sheet 2. You will have to do this if the car was unavailable for at least 30 consecutive days and you were providing fuel but stopped doing so.

Working sheet 2 can look very daunting to the untrained eye, which is why we recommend you either use HMRC’s calculator if you are able to, or seek the help of a trained accountant.

Health insurance

Health insurance is an extremely common, popular and important employee expense. One advantage is that there are a lot of exemptions that you do not have to report to HMRC. These include:

• salary sacrifice arrangements
• one health check per year
• eye tests required by health and safety legislation
• glasses or contact lenses if they are required for working with a monitor or screen
• medical treatment outside the UK
• treatment for injuries resulting from the workplace
• treatment to help an employee to work.

Anything that HMRC does not consider as an exemption must be reported to HMRC through a P11D form.

Childcare payments

If you provide employees with childcare payments or vouchers above a certain limit, you will need to report it on your P11D form. This limit depends on the income tax rate of the employee the childcare is for. The limits are currently as follows:

Employer-supported childcare below the exempt limits is usually tax-free and does not have to be reported. There are also exemptions for workplace nurseries that meet certain HMRC criteria.

Gifts and entertainment

You don’t have to report and pay tax on a gift you give to an employee if it is a ‘trivial benefit’. A benefit is considered trivial if all the following apply:

• it cost you £50 or less to provide
• it is not cash or a cash voucher
• it is not a reward for the employee’s work or performance
• it is not in the terms of their contract.

For any other gift, specific tax rules apply, depending on the type of item you give.

You also will not have to report expenses you make on employee entertainment as long as that event is open to all staff – not previous employees – and it costs £150 per head or less.

If you fall at that hurdle, you will need to report the expenses on your P11D and potentially pay NICs on it.

Whether you need help with your P11D, or want to check whether something counts as an exempted expense, we offer expert professional advice and guidance.