Submit Your Employee Expenses and Benefits by July 6th

July 6th is a key date in the accounting calendar. It’s the deadline for reporting year end employee expenses and benefits to HRMC, through P11D returns. If you fail to deliver the P11D by the deadline or delivery of incorrect returns it will result in penalties and interest.

In general terms, any expenses that an employer repays to, or on behalf of their employee, which provide a direct personal benefit to the employee, are regarded as a benefit in kind, and these need to be reported on the P11D.

HMRC's broad definition of a benefit-in-kind is anything of monetary value you provide to your employees that is not 'wholly, exclusively, and necessary' for them to perform their contractual duties. 

So, the refund of travel expenses for a work-related course would not be a benefit in kind, but an interest free loan for a rail season ticket would be treated as a benefit in kind. 

The tax authorities are interested in ensuring that the additional value or benefit you are providing to your employees, beyond their salary, is taxed appropriately.

Typical benefits in kind include:

• company cars and fuel

• voucher and discount schemes

• private medical insurance

• interest free loans

• subscriptions

• professional fees

• cycle to work schemes

• share options

• certain childcare vouchers.

For a definitive list, please check with HMRC’s A to Z Guide to Expenses and Benefits.

The P11D form reports benefits in kind, by employee. HMRC receive a copy of these details, and so do employees. The taxable value of these benefits is calculated in and deducted by payroll. 

Is a car allowance a benefit in kind?

A company car cash allowance is not treated, for tax purposes, as a benefit in kind, and is taxed in the same way as salary because it’s a cash allowance.

Employees pay income tax and national insurance on the car allowance, but as it is effectively cash, it’s taxed in the same way, through payroll. 

What is the effect of Covid on P11Ds?

Changes to working practices caused by lockdown mean that HMRC relaxed some of the P11D requirements, which covered the tax year 2021/22, and in some cases the year before too. 

Working from home

Employees were given temporary tax relief for an allowance of £6.00 per week for both the 2020/21 and 2021/22 tax years, if they needed to work from home for some or all of the tax year.

Equipment for working from home

HMRC provided an exemption reimbursing employees’ costs to buy equipment for the specific purpose of working from home. From April 6th 2022 this reverts to the pre-pandemic position and will taxable. 

Covid testing provided by employers for employees

The costs of Covid test are not treated as a benefit in kind by HMRC for tax and NI purposes, and this exemption will continue until April 5th 2023. 

How can we keep track of benefits in kind? 

Expense management software can help you with the reconciliation of year end expenses. Solutions like Expend enable you to capture and categorise expense claims in real time, and integrate the data with accounting packages such as Xero or QuickBooks.

This is hugely beneficial in terms of effort and cost savings across the working year, and especially useful during P11D season, as you can categorise and report on benefit in kind expense payments with ease.