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The Top 10 common P11D mistakes
23 January 19 | By: Jas Jhooty
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Most common errors
In this week’s article we have complied a list of common errors some employers make when they come to prepare their P11Ds.
Effects of VAT
Always include the full amount of VAT on the P11D irrespective of whether or not it can be recovered from HMRC. As most businesses are only concerned with the net cost it is a very common (& expensive) mistake to leave off the VAT element on benefits-in-kind.
Incorrect list and accessory prices for company cars can lead to under/overpayments of tax and Class 1A National Insurance Contributions. The list price is the inclusive price published by the manufacturer and includes all standard accessories, relevant taxes, delivery, etc. It is not the dealer’s advertised price or price paid for the car which could include discounts and cashbacks.
Later accessories added to company cars which exceed £100 should be included on forms P11D. These could include alloy wheels and, in some cases, satellite navigation systems. CO2 emissions data not taken from the V5 registration document for company car/fuel scale benefits could trigger an error fine. Cars first registered in the UK from 1 March 2001 (most company cars fall into this category) will have an approved CO2 emissions figure on the Vehicle Registration Document (V5).
Company car availability
If a company car is not available to the employee because it is being serviced or repaired and a similarly specified vehicle is provided to the employee in the interim, the “courtesy car” can be ignored and the P11D can be completed as if the original company car was always available to the employee as long as the period of unavailability is for less than 30 days.
Some employers misinterpret this 30 days unavailability rule for company cars and mistakenly apply it to periods when the employee is a new joiner to the company car scheme and is awaiting delivery of their newly ordered company car.
Car fuel benefit
Don’t forget that the car fuel benefit is an “all or nothing” charge. You need to be very careful that your mileage record keeping is immaculate if you intend to return a company car benefit without a corresponding car fuel benefit charge.
This article provides more details of the steps you should take to avoid the car fuel benefit charge.
Fuel cards for privately owned vehicles
You cannot return a car fuel benefit in cases where an employee has been issued with a fuel card for their privately owned vehicle. The car fuel benefit only applies to company cars. Instead the total spend on the fuel card should be reported on the P11D under either Section K – Services supplied or in the brown Class 1A NIC box for Section M – Other items.
Where vans are taken off your premises overnight by your employees a van scale charge may be imposed of £3,000 regardless of the van’s age as HMRC will assume that the vehicle is being taken away for private use.
The only way to eliminate this charge is to completely satisfy some quite onerous requirements to prove that there is no private use.
If you have vans, it is worthwhile reviewing the terms of their usage annually before submitting P11Ds.
In situations where an employee has a fluctuating loan balance throughout the year, make sure you correctly fill in the box for the maximum balance on the P11D. Don’t be surprised to receive an election from HMRC for the alternative precise method of calculation in these cases. Click here for more information on beneficial loans.
Private medical insurance
Don’t forget to include the Insurance Premium Tax element in your cash equivalent calculations.
Click here for more information on medical costs and welfare benefits.
Many employers submit incorrect P11Ds which either don’t report staff entertaining or incorrectly show that client entertaining has been disallowed in the employer’s accounts – by putting a cross in section N.
This can lead to a full HMRC enquiry into entertaining expenses including the corporate tax and VAT treatment.
Mileage payments reimbursed to employees using their own cars in excess of HMRC’s Approved Mileage Allowance Payments (AMAP) rates – currently 45p for the first 10,000 miles and 25p thereafter – are fully reportable on forms P11D.
Errors often occur where business mileage in an employee’s own car is over 10,000 miles in the tax year.
Click here for more information on mileage record keeping requirements.
Transfer of an asset
Often, benefits-in-kind are not reported where an employee benefits from the transfer of an asset at less than its market value, such as cars and computer equipment.
Make sure you have assessed the benefit for tax purposes correctly, taking in to consideration the sum paid (if any) and the correct market value. A good idea is to have a look on ebay for a similar item and keep a printout of the final cost it sells for.
Correctly identifying the relevant NIC charge
Identifying items to ‘fit’ the appropriate box can be difficult to assess. You should make sure you have applied Class 1 National Insurance Contributions on pecuniary liabilities (bills in the employees’ own names) and assessed benefits liable to Class 1A National Insurance Contributions in line with HMRC guidance found in Appendix 1 of the Booklet CWG5.
How emTax can help
We are currently offering very affordable P11D training courses that can be delivered online at a cost of £500 + VAT per session. Up to 5 employees from your organisation can attend each online training session for this fixed price.