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HMRC publish their 2016 Expenses and Benefits Toolkit
13 April 16 | By: Jas Jhooty
HMRC has recently published their 2016 Expenses and Benefits Toolkit to assist employers to accurately prepare their end-of-year P11D submissions. Although the toolkit is primarily designed for use by tax professionals and accountants, it also serves as a very useful aide memoire for businesses that run their own payrolls and prepare their own P11D returns.
Use of the toolkit
This toolkit is provided free of charge by HMRC on an entirely voluntary basis. It is designed to highlight particular areas of employment tax risk that employers should be aware of when preparing to complete their 2015/16 P11D returns.
The toolkit also contains a checklist to confirm whether particular areas of risk have been reviewed and what the outcomes are. This checklist comprises of a detailed review of the following areas:
Review of expenses and benefits
If an employer provides a director or employee with anything other than pay it may have to be reported as an expense or a benefit. The type of expense or benefit and the way they are provided can affect the tax and NICs to be paid and the reporting requirement. Some expenses and benefits although not liable to tax or NIC may still need to be reported. Therefore, errors can arise and it is important to consider all of the facts surrounding expenses paid or benefits provided.
There is a general requirement to report all non-exempt expenses and benefits on the relevant forms. However expenses that are ‘wholly, exclusively and necessarily’ incurred in the performance of the duties of employment are not normally liable for tax and NICs and the director or employee can normally make a claim for relief under S336 Income Tax (Earnings and Pensions) Act 2003 on their Self Assessment tax return.
To avoid such routine reporting of expenses and benefits an employer can apply for a dispensation to cover these. From 6 April 2016 dispensations will cease to exist and will be replaced by an exemption for paid or reimbursed expenses.
One of the most common types of benefit relates to the use of company cars and vans by directors and employees. The term company car and van relates to any business vehicle provided by a sole trader, partnership or company to a director or employee. Errors can arise when vehicles available for private use are not identified and where private fuel provided is not reported on the relevant forms.
Travel and subsistence
Generally tax and NICs are not chargeable on business travelling expenses providing they are necessarily incurred on travelling in the performance of the duties of employment or are attributable to necessary attendance at a temporary workplace. Certain expense payments and benefits are exempt and a deduction or relief against the earnings from the office or employment may be available for others. In the absence of a P11D dispensation, where a deduction or relief is available, the expense payment or benefit should be reported on the relevant form P9D or P11D and the claim for deduction or relief included on the director’s or employee’s Self Assessment return.
Some directors’ or employees’ personal bills may be allowable providing they are wholly, exclusively and necessarily incurred in the performance of their duties and in the circumstances where the employer has contracted for the supply of the service, for example where additional expenses are incurred when an employee works at home under a home working arrangement. If non-allowable personal bills are paid and these are not identified errors can arise.
Use or transfer of assets
The term ‘asset’ can cover a wide range of items and there are different rules if an asset is made available for a director or employee to use rather than transferring ownership to them. The rules in this area can be complex and errors commonly occur in identifying the benefit and calculating the correct benefit charge.
Payrolled expenses and benefits
In exceptional circumstances expenses and benefits are taxed under PAYE through the employer’s payroll by agreement with HMRC. There remains a requirement for the employer to report them on P9D or P11D for 2015/16. For future years employers can register to voluntarily payroll benefits through the online Payrolling Benefits-in-kind service.
How emTax can help
This toolkit, if utilised correctly, will help employers to ensure that their 2015/16 P11D returns are as accurate as possible.
We are currently offering a comprehensive Benefits and expenses training course that includes all of the latest updates on employment tax legislation that will prove to be invaluable in further assisting you in ensuring that your 2015/16 P11D returns are as accurate as possible.
Please do not hesitate to contact us if you require more information about this, or any other of our employment tax services.