HMRC is well-known to have time-consuming and sometimes complicated forms that you are required to fill out as a limited company director. The P11D is one of these; essentially, a P11D will report the benefits paid out to a company’s employees. These items are known as ‘benefits in kind’ and as a contractor with a limited company, you may at some point need to fill out a P11D form.
Benefits for employees or directors of a company, otherwise known as benefits in kind, must be reported on a P11D if they are considered taxable. You may need to pay tax and National Insurance on taxable benefits that you report on a P11D form.
P11D forms used to require directors to also report allowable business expenses, but as of 6 April 2016, this is no longer required where certain criteria is met. If you’re the sole director and employee of your limited company, it is less likely that you’ll need to produce a P11D.
P11D forms detail the cash equivalents of the taxable benefits that you have given yourself – and perhaps other employees – throughout the tax year. If you have an accountant, such as Churchill Knight & Associates Ltd, you don’t have to worry about knowing how to calculate this as the P11D form can be completed for you.
Some taxable benefits that are required to be reported on the P11D include:
- Company cars
- Company vans that are not 100% for business use
- Private medical and dental insurance
- Living accommodation
You do not have to pay tax on certain ‘trivial benefits’, therefore these do not need to be recorded on the P11D. A trivial benefit is non-taxable if all of these conditions apply:
- The cost of the benefit is £50 or less
- The benefit is not cash or a cash voucher
- It is not a reward (for work performance)
- It is not stated in an employee’s contract to receive the benefit
It is important to note that if you are the director of a company with five shareholders or less, the trivial benefits you can provide is capped at a value of £300 per tax year.
If you have to submit a P11D form, you also need to submit or have your accountant submit a P11D(b) form; this is where your company will declare any Class 1A National Insurance Contributions that are payable on the taxable benefits that you have reported on the P11D.
When do the P11D and P11D(b) forms need to be submitted?
The above forms must be completed and sent to HMRC by 6 July for the tax year previous. For example, if you are reporting on benefits in kind for the tax year 6 April 2017 to 5 April 2018, you will need to send off these completed forms by 6 July 2018.
If you are due to pay employers’ Class 1A National Insurance on any of these benefits, you must pay by either 19 July in the month you submitted the form, or by 22 July if your payment will be via an approved electronic method. You or your accountant can arrange for any deductions due to be paid through your company’s payroll system.
What if I miss the deadline for the P11D and P11D(b) forms?
If you have a contractor accountant on hand who will take care of these forms, you don’t have to stress about meeting a deadline. We know you’re busy, so we can handle the completion and submission of these forms on your behalf as part of our limited company accountancy service, provided we have all the required information from you.
However if you handle this by yourself, you need to make sure you submit the P11D and P11D(b) forms by 6 July for the previous tax year. The penalties for not doing so is £100 per 50 employees for each month your forms are late. This would mean even if you are the sole employee of your own company, this penalty would still be applicable. There are also interest charges for late payments of National Insurance Contributions owed on benefits in kind, and penalties for incorrect information on P11D forms.
How often might I have to pay National Insurance Contributions on benefits?
You won’t always have to make deductions for National Insurance based on benefits you’ve allowed yourself through your company. The important thing is to be diligent and aware of what company activities might attract National Insurance.
One of these such activities is a Director’s Loan. If you have an overdrawn Director’s Loan account over £10,000 at any point in the tax year, meaning you have taken a loan from your company but haven’t yet paid it back, you will attract a National Insurance liability on the overdrawn amount. To avoid this, try not to draw a Director’s Loan unless you absolutely need it, and make sure you repay it in due time.
As you can see, dealing with certain administration and paperwork as a contractor can be intimidating. However, confusion can be avoided by researching and asking your accountant questions. We can also offer tax planning sessions to ensure your company is being legally tax efficient. Clients will also receive copies of their P11D and P11D(b) forms when they are completed and submitted to HMRC.
If you are a Churchill Knight client and have questions about P11D forms, contact our personal tax team on 01707 671648; if you have questions about limited company services, visit our website or contact us.