Section H - Loans


General and background information

A benefit arises if the employer lends money to their employees and charges interest at less than The official interest rate


There are two main methods of calculation. Employers would normally use the averaging method unless requested by HMRC to use the alternative precise method:-


Normal averaging method

Step 1

1. Find the maximum amount of the loan outstanding on:


a. 5 April preceding the year of assessment, or

b. If the loan was made during the year, the date on which it was made.

2. Find the maximum amount of the loan outstanding on:


a. 5 April within the year of assessment, or

b. If the loan was repaid during the year, the date on which it was repaid.

3. Add together the maximum amounts found at 1 and 2, and divide the result by two. This is the average loan.


Step 2

Calculate the average official rate of interest for the period covered in step 1. If the rate changed during the period of the loan:


1. Multiply each official rate by the number of days when it was in force

2. Add these figures together and

3. Divide the result by the number of days in the period.


Step 3
Multiply the average loan (step 1) by the average official rate of interest (step 2) and multiply by the number of whole months (a tax month runs from 6th day of one month to the 5th day of the following month) for which the loan was outstanding in the year, then divide the result by twelve.

Alternative precise method of calculation
The normal averaging method works well for steadily decreasing loans over a period of time. However if there is a fluctuating loan (e.g. a director’s loan accounts where the loan balance can increase sharply part way through the year and is brought back down before the end of the year), HMRC or the employer can elect for the alternative precise method of calculation. In this circumstance the actual balance on each day is multiplied by the official interest rate in force on that day. This is the reason why you have to report the maximum balance of each loan on the P11D form.
Small loan exemptionIf the combined balance of all loans made available to an employee does not exceed £10,000 there is no need to report a benefit.
P11D Form: Section H


P9D Form: None (Obsolete after 2015/16 Tax year)

There is no relevant section for a loan benefit record entered in the P11D Organiser system. 

Loan benefit information will not appear on a P9D facsimile, although it will be detailed on the employee benefit statement.


P11D Guide: Section H


  

Additional HMRC Documentation and external help


HMRC P11D Guide:-

https://www.gov.uk/government/publications/paye-end-of-year-expenses-and-benefits-p11d-guide


HMRC Booklet 480 (Chapter 6)

https://www.gov.uk/government/publications/480-expenses-and-benefits-a-tax-guide


HMRC Working sheet 4

https://www.gov.uk/government/publications/paye-interest-free-and-low-interest-loans-p11d-ws4


HMRC Internal Manual - Employment income manual

https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim26250




Manual data entry 
Benefit and expenses records are assigned to an employee record within the system. The software will require a certain amount of information in order to calculate a benefit in kind value. The information required to be entered is particular to each section of the P11D.
How to manually enter a Section H benefit:
1
Select the employee record to that you wish to assign the benefit to

2 
Select benefit section “Section H” from the drop-down benefit selector – or click on the “Section H” icon at the top of the screen.



Click the ADD button.


4 
Select from the list of existing benefit descriptions for this P11D section and click OK - or click the ADD button to enter a new benefit description of your own.

4aIf you decide to ADD a new loan type you will be taken to the loan setup screen. By default loans are created as 'Non Qualifying', you would only need to change this to 'Qualifying' if the loan you are creating is subject to something like MIRAS or some other tax exempt loan.


You can then enter the name of the loan your are creating and choose the calculation method - usually Actual Monthly.
5
The following data points are used to calculate the benefit in kind for this benefit type:
  • Method: Selection to change the recommended default type of "Actual Monthly"
  • Currency: Selection to change the recommended default type of "Sterling"
  • Opening balance & opening date 
  • Closing balance & closing date            
  • Maximum balance 
  • Interest already paid by employee

Having entered the required data points to calculate the BIK value, click SAVE to save the benefit record.



The BIK record will be saved and displayed sucessfully.






Importing Data

File Type
The system can import data in numerous file types but a CSV (comma separated values) file type is recommended; it removes the complexities of any existing Excel formulas and formatting etc.

Header row

The header row is used by the system to automatically select the correct import target field to match for import. It is therefore recommended to use the exact naming convention so as to remove the need to have to manually select the appropriate system target field.  Click the link to download the software Import header row TEMPLATES  


Square block of data

Remove all data above header row, below the last record and after the last column of data - this helps with interpreting the data correctly.


Consistent data

The final column of data should contain a consistent entry for every row of information i.e. a value in every cell of the spreadsheet. This ensures that the software moves to the next employee record consistently at the correct time. It is recommended to place either something like a payroll number or simply paste a column of ‘xxx’ in the final column to provide an import record end.


Formatting

The format of some of the data to be imported is very important – the following pages clearly show what data and formats the software is expecting to import.


Key field

ALL data imported must contain a Key field – NI Number or Payroll Number for employees and Registration Number for cars – this is necessary to ensure that data can be married up correctly. Key fields are clearly highlighted in the table.


Column Order

The column order in the spreadsheet is not important, as the P11D Organiser will automatically map as many fields as it can using the header row names, and will remember the settings made during the import process for future use (system assumes you will be using that format next time around).


Compulsory Fields

Certain fields must be included in order for the import routine to correctly allocate/calculate benefits. These “Compulsory” fields are clearly highlighted in the tables.


Optional Data

The remainder of data that can be imported is categorised as optional and is displayed in standard type.


Data Fields table - Interest Free Loans and Low Interest Loans

Information

P11D Field code

Type

Field Length

Inclusion

Pre-Format

Notes

Number of Joint Borrowers

BORROW

Numeric

1

Optional

 


Cash Equivalent

CASHEQV

Numeric

10

Optional

 

Complex loans only

Closing Balance

CLOSING

Numeric

10

Compulsory

 


Description of Loan

DESCRIPTIO

Character

50

Compulsory

 


Available from Date

FROM

Date

8

Compulsory

dd/mm/yyyy


Interest Payable

INTPAYABLE

Numeric

10

Optional

 

Complex loans only

Amount Made Good

MADEGOOD

Numeric

10

Optional

 


Maximum Balance

MAXIMUM

Numeric

10

Compulsory

 


N I Number

NI_NUMBER

Character

10

Key field

 


Additional Description

NOTES

Character

30

Optional

 


Opening Balance

OPENING

Numeric

10

Compulsory

 


Payroll Number

PAYROLL

Character

20

Key field

 


Tax Payable

TAXTOPAY

Logic

1

Optional

 

Complex loans only

Available to Date

TO

Date

8

Compulsory

dd/mm/yyyy





Step by step guide to importing data

STEP 1 – IMPORT

Select FILE > IMPORT WIZARD (or use the system IMPORT icon to go to the Import wizard)


STEP 2 – ROUTINE

Select the Import routine to run: H - Interest free and low interest loans and click NEXT



STEP 3 - SELECT SOURCE FOLDER TO USE

Navigate to and select the location of the folder that contains the import .CSV file to be used in the import process 



The system will also display all other spreadsheet import files that are saved in the the same directory.



STEP 4 – MAP SOURCE DATA TO TARGET FIELD

Using the import template provided, the system will automatically configure and select the matching target field for the source data on the source CSV file (header row displayed on the left will match the correct target field displayed on the right)

TIP: Use the "Reconfigure P11D Organiser target field name" button to assist with this "mapping" process.


Click NEXT


NOTE: If you are not using the template then you will need to manually select the correct target fields using the “TARGET FIELD SELECTION” button. (These will initially be un-selected and displayed as ** EXCLUDED ** in the TARGET FIELD column) - CLICK HERE TO DOWNLOAD THE TEMPLATES




STEP 5 – TARGET FIELD & DATA VALIDATION

The system will display the data in a table. A key ID selection of must be made between either PAYROLL number or NI Number (unique reference for employee)

 

GREEN entries are EXISTING benefit records in the system benefit database that will be updated/replaced (recognized by their DESCRIPTION and PAYROLL) 

WHITE entries are NEW records being added to the system benefit database (recognized by their PAYROLL number and DESCRIPTION)

YELLOW entries are NEW Benefit descriptions records/categories being added the system benefit database. (not recognized by their DESCRIPTION) 

PURPLE entries are NEW employees so cannot be assigned benefits during this import process (not recognized by their PAYROLL number)



Clicking the NEXT button, the system will begin to validate the data and any records failing validation rules will be referred to in a series of pop-up messages. Any resulting invalid records will be removed and saved to an error log file at the end of the import process.





STEP 6 – BENEFIT DESCRIPTION CATEGORIES & PROFILE VIEW

The system now displays the total number of records being imported for each displayed description and provides an opportunity to Add, Edit or Exclude the benefit records displayed.


Any NEW benefit categories (not recognized by DESCRIPTION) will need to be added and defined - click Add to be do this to be able to continue to the next stage of the import process.


STEP 7 - CONFIRM & SAVE BENEFIT PROFILE 

The new benefit description will be added and saved, additional properties such as Class 1A NIC settings or pay-rolled benefits can be defined here, once complete click OK  save and proceed.



The benefit profile properties that can be set include:-


Description of loan/benefitEditing existing loan "Descriptions" will rename (recalculate) and existing records named as such.
Class 1A NIC
Ordinarily system pre-set and unchangeable (greyed out) as being clearly defined by legislation (Brown or Blue boxes on the P11D form). Although for certain sections of the P11D, the setting can be user-defined so as to set to either “Pay” or “Not pay” Class 1A NIC for a specific benefit type. e.g. “Overseas Medical Insurance” = Class 1A NIC setting “NO”
Calculation methodA drop-down to select the default loan type setting (e.g Actual Monthly, Actual Daily)
Available From & To datesAn option for setting available FROM & TO dates for all matching benefit descriptions. The dates are then applied and used in conjunction with a pro rata setting to automatically calculate benefits based on the dates available. i.e. setting FROM date to 01/01/2014  and TO date to 31/12/2014 in the 2013-14 Tax year would calculate a total of 95 days availability of that benefit and then be used to calculate a benefit-in-kind value as such. e.g. a £750 annual premium divided 365 x 95 = £195.21




STEP 8 - BENEFIT DESCRIPTIONS SUMMARY

The system displays a summary of the total number or records for each benefit description in the import. If you are happy with using the revised benefit categories and total of entries as shown, click Next 




STEP 9 – COMMIT DATA CHANGE

The system will now commit the data & create the benefit records. The system will confirm the numbers of records to be added & updated and the total number of records from the source file.  

NOTE - Backup DATA Folder is recommended as it gives you a restore point prior to committing the changes being made during the import.

CLICK FINISH



STEP 10 – EXIT IMPORT ROUTINE OR DEAL WITH ERRORS 

EXIT IMPORT

If your file contained no errors that need to be re-imported, simply click CANCEL to exit from the import wizard and return to the main P11D Organiser system.



ERRORS HANDLING 

Any records removed during the validation process will be saved as an “Error file”
These error files can then be viewed and saved in MS EXCEL. Having made the necessary corrections and changes to the invalid records contained in the "error file" it can be used as a new source file to import the corrected records and complete the import for ALL RECORDS (initial load plus the subsequent "fixed" error records)


If your file contained no errors that need to be re-imported, simply click CANCEL to exit from the import wizard and return to the main P11D Organiser system.