How to Stay Safe from HMRC
24 September 15 | By: Jas Jhooty
A glitch in HMRC’s software has led to problems with 2014/15 P11Ds. This could leave employers vulnerable to penalties.
In July 2015 HMRC’s computer systems ran into trouble resulting in some employers not being sent a P11Db as a reminder that this form would need to be submitted soon. The P11Db acts as an employer’s confirmation that all P11Ds that were required (for 2014/15) have been submitted, and as a declaration of the Class 1A NIC payable on the benefits reported.
HMRC has said that despite the IT problem it expected all employers to meet the filing deadline regardless of whether or not they had received a reminder P11Db. It also said it would charge penalties as usual for forms submitted late. Penalties start at £100 per month, but increase depending on how many employees you have.
The deadline for the Forms P11D and P11Db was 6 July 2015; however HMRC won’t charge a penalty where you submitted them by 21 July. The payment of Class 1A NIC was due by 19 July, or 21 July if paid electronically.
More computer problems
HMRC’s IT problems continued in August 2015, resulting in P11Dbs and payslips for overdue Class 1A NIC Form P30B being sent out incorrectly to employers who may have already submitted the forms and paid their NIC bill.
HMRC’s bungling IT system has left many employers wondering where they stand and so it advises the following action:
What happens if you find out something should have been reported to the Taxman on Form P11D as a benefit-in-kind (BiK), but the deadline for submission was months ago. Under the P11D penalty regime, if you fail to submit a P11D when one is needed, employers can be fined £100 for each missing form. This is multiplied by each month they’re overdue, starting from July 6. So if you’ve overlooked P11Ds for three employees, by mid-January you’re facing a bill of £2,100. But it could be even worse!
Penalties – making an error
If you make a mistake on a P11D you could be charged up to £3,000 per form. In practice, we’ve never come across penalties that have come close to that level. But however much they are for, penalties are best avoided.
Unfortunately, there are some benefits and expenses that that are likely to produce a tax bill for the recipient, e.g. company cars, medical insurance etc. There is one occasion when you can “shut the stable door after the horse has bolted”. You may have missed the deadline for submitting Forms P11D but provided the HMRC hasn’t caught up with you, there’s still something that can be done to save the day.
Tip 1. Get the employee concerned to reimburse the company with the cost of the benefit-in-kind (BiK). This will effectively cancel it and any penalty problem. But this lands the employee with the expense.
Tip 2. The company can make a loan to the employee sufficient to reimburse the cost of the BiK. Later it writes off the loan, which is a BiK in itself, but only in the tax year it’s written off.
Example. In 2014/15 E Ltd paid £500 medical insurance for employee B, but fails to submit a P11D for him. It discovers the error in December 2015 and tells B who agrees to reimburse E Ltd, provided they ultimately meet the cost. E Ltd makes B an interest-free loan of £500; he then reimburses the cost of the BiK. In March 2016 E Ltd writes off the loan, which is treated as a BiK of £500 for 2015/16. E Ltd has converted the 2014/15 BiK into a 2015/16 loan write-off BiK. The risk of penalties for 2014/15 is averted and E Ltd now has until July 6 2016 to report the loan BiK.