4 May 2011
May 2011 Update
Employer provided benefits and form P11d
HMRC are quite busy inspecting employers' records looking in particular at benefits-in-kind provided by employers not reported on forms P11d. We are currently busy preparing end of year PAYE Returns and that will be followed by the P11d Returns and some common problem areas are referred to below. If you feel your company may provide any benefit to any director or employee which should be included on a P11d Return please let us know. Please note references to employee include directors and their family and references to employer are generally to your own company.
Company Cars - Pool Cars
You will either have a company car, with or without private fuel, and be taxed accordingly or you will have a private car and claim business mileage at the approved rates (see below). It is tempting to claim a vehicle is a pool car and HMRC are very keen to resist this. The legislation regards a car as taxable on an employee if it is made available and therefore it is very difficult to win a pool car argument unless the vehicle is garaged at a place which is not an employee's home and therefore virtually impossible to achieve this status if the business premises are also the home.
Approved mileage rates
The approved rates with effect from April 2011 are 45p (40p prior to that date) per mile for the first 10,000 miles and 25p thereafter. If an employee receives less than this they claim tax relief on the difference on their tax return. To support a claim a log of business journeys must be maintained listing the date, destination, number of miles and reason for the trip.
Vans
While most vans are recognisable as such twin cabs are taxed as vans and not cars if they have a payload greater than one tonne (NB this excludes any top which covers the goods part of the van). However vehicles such as the Land Rover Defender are cars (and to digress so too are Camper Vans). Where private use of a van is anything more than incidental then the annual benefit in kind is chargeable based on a value of £3,000 (plus £500 if fuel is provided). If you have a company van please keep any record to defeat a suggestion that private use is anything more than incidental although it has to be said this will be a difficult argument to support.
Subsistence
HMRC approved rates for subsistence expenses which can be paid without any P11d reporting requirement:-
- £5 if you buy breakfast and start the journey before 6am
- £5 if you are out of the office on business for more than five hours and buy one meal
- £10 if you are out of the office on business for more than ten hours and buy two meals
- £15 if your business trip keeps you beyond 8pm and you buy an evening meal
Mobile phones
A company can provide one mobile phone to each employee without creating a taxable benefit irrespective of the amount of private use. However the contract must be between the employer and the phone provider and if the company pays the invoice on behalf of the employee this constitutes a benefit.
Company paying employees bills
The principle mentioned above re mobile phones applies to all invoices and there is always a potential problem where a company pays directly a bill in the name of an employee so please always endeavour to ensure the company contracts directly with a supplier and that the supplier invoices the company. For this reason it is generally not a good idea for the company to pay an employees' domestic bills and if there is business use of the house it is preferable for the employee to pay the supplier and to claim a business element from the company. The problem here is proving to HMRC satisfaction an appropriate business element.
Private medical insurance
Private medical insurance may be provided by an employer. The premiums are taxable on the employee and the company pays Class1A National Insurance (at 13.8%). It may therefore be worthwhile treating such premiums as private and charged against a Director's Loan Account if possible. Please be aware employer provided medical insurance does not create a tax advantage although premiums payable are generally lower through an employer scheme than in a private scheme.
Life assurance
A very thorny subject and the taxability depends on the nature of the policy and the intended beneficiary. However a "Relevant Life Policy" is tax deductable to the company and not subject to income tax as a benefit. It is a term assurance policy.
Employer provided childcare
I have referred to many times. A company can provide nursery vouchers although it does not have to and can create a tax free benefit by contracting directly with a registered child minder. Please be careful to ensure you have the correct contract in place and do not simply allow the company to pay the child minder/nursery
Company assets available for private use
Beware of a company owned asset made available for use by employees. Although this is likely to be quite rare please advise if you have such a situation to declare on a P11d.
Dispensations
It is possible to apply to HMRC to pay certain amounts to employees without creating a P11d reporting requirement. However HMRC are reluctant to grant dispensations to small employers where the expenses can not be independently verified. Nevertheless if you have an issue with regard to the company paying business expenses which may have any private element attached then we should discuss submitting a dispensation application to HMRC.
Salary Spreadsheet
In case you have not received the sheet for 2011/12 please email david@saltd.org to request
Obviously if we included benefits in previous years we will be aware and will require the appropriate information to complete this year's Return.
