General and background information
This P11D section is now divided into five subsections:
- Travelling and subsistence payments
- Payments for use of home telephone
- Non-qualifying relocation expenses
- Other expenses.
Travelling and subsistence payments
Employers should enter the total amount spent on fares, hotels, meals etc. Employees may then make claims for tax deductions.
Where employees intend to make claims for tax deductions they will need to ensure that they (and their employers) keep sufficient records to support such claims. This would include, for example, private and business mileage logbooks, amounts spent on meals, hotel bills and so on. All of these must be fully supported by bills and receipts which HMRC may wish to see.
If their payments do no more than reimburse legitimate business expenses, employers may wish to apply for a dispensation. If agreed this can save work for both employer and employee.
The total of sums paid to or on behalf of the director or employee, or members of his family or household, in respect of fares, hotels, meals and travel inside and outside the UK, any amount made good or which has suffered a tax deduction; and the cash equivalent.
Measure of expense
The costs met by the employer.
- Dispensations are commonly given in this area, although directors are sometimes excluded.
- HMRC have produced a specific guide called Booklet 490, which you may refer to for detailed information. A brief note of some major points is set out below.
- Business travel is defined as journeys employees must make in performing their duties, or journeys to a place they must attend to perform their duties. Travel to a permanent workplace is regarded as home-to-work travel or ordinary commuting and is not allowable. Additionally, a journey that is substantially ordinary commuting is not allowable. Although HMRC gives some guidance (see Booklet 490 paragraphs 4.10 – 4.13), it is left for the employer to decide whether a journey is tax allowable or not and consequently covered by any dispensation or not.
- Relief for accommodation and subsistence costs is available for attendance either at a temporary workplace or at a workplace attended for a temporary purpose. Relief is therefore generally available for site-based workers, though after a maximum period of 24 months any workplace is regarded as a permanent workplace (Booklet 490 paragraphs 3.12 – 3.15).
- HMRC often scrutinises overseas business trips or conferences, particularly where family members accompany the director or employee. All relevant expenditure should be shown on Form P11D and claims for expenditure in relation to the family need to be carefully considered (see Booklet 490, paragraph 8.23).
- Reasonable payments to cover extra travel and accommodation costs incurred when public transport is disrupted due to industrial action are not subject to income tax and need not be shown on Form P11D. Similarly, if the employer provides disabled individuals with transport or financial assistance for home-to-office travel, no income tax is charged. Directors’ and employees’ travel expenses for travel between two group companies, both of which employ them, are tax-free.
- Where the following conditions apply, there is no requirement to enter the cost of a taxi, hired car or similar private transport on Form P11D:
- the employee is occasionally required to work until 9pm or later, but such occasions do not occur with regularity (for example, every Friday) or frequently (deemed to be more than 60 times in a year)
- at the time of going home, either public transport has ceased or a work-to-home journey would be likely to take much longer than normal.
- For personal items, such as newspapers and mini-bar, a tax-free amount of £5 a night (UK) or £10 a night (overseas) is allowed when travelling on business. These are called incidental overnight expenses and, provided the limits above are not exceeded, there is no need to declare these on Form P11D. If the limits are exceeded, the full amount, not just the excess, becomes taxable and subject to Class 1 or Class 1A NICs and should be reported in full in section N: blue or brown box respectively.
- Tax relief is available for home-to-work travel in a qualifying work bus.
There is a popular misconception amongst employers that entertaining expenses are not taxable because they are disallowed in computing the employer’s tax bill.
In the absence of a dispensation employers must always declare all amounts which relate to entertaining. It will then be open to employees to make claims for tax deductions.
Claims made by employees are subject to the wholly necessarily and exclusively rule. Care must be taken as personal entertaining (e.g. spouses, partners, colleagues or business acquaintances) is not allowable for tax purposes. There must be genuine business reasons on each occasion. Full records must be available to support claims. HMRC may wish to have full details of the circumstances, including who was entertained on a particular occasion, the reason for the entertainment, and how much was spent.
Employers should also be aware that Class 1 NIC may also be chargeable on personal liabilities.
If you carry on a trade, business, profession or vocation, you should also enter:
- A tick in the box if any of the expenses payments have been, or will be, disallowed in your business’s tax computations.
- A cross in the box if none of the expenses payments have been, or will be, disallowed in your business’s tax computations – staff entertainment only.
The total of all payments made exclusively for business entertaining, and any amounts made good or from which tax is deducted, resulting in the cash equivalent. Indicate if the organisation is trading and the entertaining costs have, or will be, disallowed for corporation tax purposes by selecting the Yes/No option. Select 'Yes' if the organisation is trading and no corporation tax disallowance is envisaged. Otherwise leave it blank.
Measure of expense
Entertaining includes the cost of food and drink, hospitality of any kind (shooting trips, Ascot or Wimbledon boxes) and gifts (unless the gift costs less than £50 a year, is not food, drink, tobacco or a voucher and includes a conspicuous advertisement). All types of payments should be considered, including:
- round sum allowance for entertaining
- cash reimbursement
- company credit card
- payment by employer of personal credit card expenditure
- expenses which are charged on to clients.
For trading organisations the cost of all entertaining is initially accessible on the employee. However, the employee may claim the cost of all business entertaining provided that the employer is not receiving a corporation tax deduction in the company accounts for that expense – hence the significance of the 'Yes/No' option. The P11D does not distinguish between staff entertaining and business entertaining. Report any staff entertaining under section M ‘Other items’ in either the blue or brown box making the nature of the entry clear, alternatively apply for staff entertaining to be included in a PSA.
- An HMRC favourite for investigation is the annual Christmas party and indeed, other annual staff functions. HMRC accepts that no taxable benefit arises if the cost (including guests) does not exceed £150 a head including VAT.
- The £150 a head limit may apply to more than one function during the year if the total cost of the functions does not exceed £150. If there were three functions one year costing £80, £60 and £40 per head respectively, it would be possible to exempt the first two (as the total is under £150) and pay tax on the £40 function.
- If the cost of a single function exceeds £150 per head, an employee will be taxable on the total cost (not just the excess).
- For the exemption to apply, it is necessary for it to be a formal annual function, not just an informal drink.
- If the function is primarily corporate entertaining, e.g. a day at the races, HMRC normally accepts that no tax should be paid by employees in attendance to carry out business duties. HMRC will only accept this argument if the evidence supports it and may challenge this claim if the employees’ spouses or families attend or if there are more employees than business guests.
- If employees of different companies have a reciprocal arrangement and entertain each other on a regular basis, HMRC will not normally accept this, even if some business is discussed.
- Booklet 480 states at paragraph 20.7 that, the expense of entertaining colleagues, that is, other employees of the same organisation is not normally allowed. The word normally appears to offer some leeway. The usual example cited involves a director who hopes to persuade a young executive to accept an unwanted move or a promotion and feels his chances of success will improve if he discusses the matter away from the confines of the office over a meal and a bottle of wine. It is difficult to draw any firm conclusions from this example, but HMRC may allow this type of entertaining if it occurs infrequently. Any telephone owned and installed by the employee will fall foul of the duality rules that disqualify the whole rental charge for tax relief purposes.
- Employees will not be taxable on the provision of free or subsidised meals provided by the employer on the business premises in any canteen where meals are provided for the staff generally, or on the use of any ticket or token to obtain such meals, if the meals are provided on a reasonable scale and either:
- all employees may obtain free or subsidised meals on a reasonable scale, whether on the employee’s premises or elsewhere
- the employer provides free or subsidised meal vouchers for staff for whom meals are not provided.
Point 4 does not apply to restaurants or hotels that provide free or subsidised meals to employees in a facility where meals are being served to the public, unless the meal is served in a part of it designated for staff use only. If the employer provides directors with their own dining room, the costs of the meals provided may not be taxable if other employees are provided with a similar facility, for example a canteen.
Payments for use of home telephone & broadband
Employers must enter the full costs of line rental and all private calls associated with home telephones that that have been reimbursed to their employees, if the phone line is in the employee’s name, Class 1 NIC’s would also be due on these reimbursements.
However if the employer paid for a second line in the employee’s home to be used purely for business purposes, no tax or NIC liabilities would arise.
The cost of all home telephone bills reimbursed or paid directly by the employer on behalf of the director, employee or member of his family or household, any amounts made good or which have suffered a tax deduction, and the cash equivalent.
Measure of expense
This is the cost of all private calls and the full rental charge.
- Any telephone owned and installed by the employee will fall foul of the duality rules that disqualify the whole rental charge for tax relief purposes. A possible way around the problem is to have a separate line installed for business purposes, although this would normally be appropriate only where a separate line is advantageous for commercial reasons. A telephone provided by the employer for work purposes would however escape both tax and NIC even if insignificant private use arose.
- Class 1 NICs are payable on personal telephones on both rental and calls not identified as business, or if no dispensation exists. It is appropriate to pass the rental and private calls through the payroll for NICs purposes or include them in a PSA.
Non-qualifying relocation expenses
This section only applies to relocation expenses that do not qualify for tax relief. Report qualifying expenses and benefits at section J Non-qualifying benefits and qualifying expenses paid late are reported at section M (brown box) above.
All expenses payments that do not qualify for relief, any amounts made good or which have suffered tax deductions and the cash equivalent.
Measure of expense
An employee will suffer tax on the amount reported because it does not qualify for relief. Non-qualifying items include compensation payments for the loss on sale of the former home, additional housing cost allowances and forwarding post. If qualifying expenses amount to £8,000 or more, then the full amount of any bridging loan interest is taxable. There is a complicated formula for calculating how much relief will be given for bridging loan interest if the £8,000 limit is not utilised fully by qualifying expenses and benefits.
Cash payments that do not qualify for relief (e.g. a lump sum paid for loss on sale of former residence) should be subjected to PAYE/NICs at the time of payment. Expenses paid to an employee in connection with relocation that are of a type that does not qualify for exemption should not be disclosed on Form P11D. Such expenses are liable to PAYE Income Tax and Class 1 NICs and should be included through payroll at the time of payment. This should be contrasted with non-exempt relocation expenses that the employee should have paid but were instead met by the employer. Such expenses should be disclosed on P11D (blue box) and Class 1 NIC is payable. These costs should be passed through payroll for NIC purposes only, or included in a PSA. However, HMRC may agree to include a lump sum disturbance allowance in a dispensation.
This is the final catch-all section to report any items not previously reported elsewhere on the P11D form unless they are exempt from tax by statute or are included in a dispensation
Examples of what can be entered here include: –
· National Insurance contributions
· Ancillary services provided with living accommodation
· Private accountancy bills
· Employee's legal fees
· Wages for personal or domestic staff e.g. chauffeuring costs
· Cost of work carried out at the employee's own home or on their property by the employer's workers or contractors.
· Employee’s traffic and parking fines
P11D Form: Section N
P9D Form: Section A(1) (Obsolete after 2015/16 Tax year)
Expenses payments made on behalf of the employee
Take care not to enter amounts that are entered in section C of the P11D.
Travelling and subsistence payments
Enter the total non-exempt expenses reimbursed on items such:
This includes travel between home and a permanent workplace for UK employments and employments performed wholly outside the UK not included above.
Read chapters 8, 9 and 10 of the 480 expenses and benefits guide for further information.
Enter all payments made exclusively for entertaining including:
the amount of any round sum allowance
specific allowances for entertaining
sums paid to third persons
If you carry on a trade, business, profession or vocation and make payments to a director or employee exclusively for entertainment, the payments should be disallowed when working out your tax liability.
Read chapter 20 of the 480 expenses and benefits guide for further information.
Trading organisations other than tonnage tax companies
If you carry on a trade, business, profession or vocation:
- tick the box if any of the expenses payments have been, or will be, disallowed in your business’s tax computations
- put a cross in the box if none of the expenses payments have been, or will be, disallowed in your business’s tax computations
Tonnage Tax companies
Tick the box if you have elected for your company’s profits to be calculated in accordance with paragraph 4, Schedule 22 Finance Act 2000.
Enter any expenses reimbursed in connection with a telephone at the home of the employee where the employee contracted directly with the supplier.
If you contracted with the supplier to provide a home telephone to your employee, enter any expenses paid by you at sections K, L or M of the P11D.
Read appendix 1 of the Class 1A National Insurance contributions on benefits in kind (CWG5) guide for further information.
Other non-qualifying relocation expenses payments
Enter any amounts that your employees should have paid, but you paid instead, in connection with a relocation, where the expense was not an exempt expense (not listed in appendix 7 of the 480 expenses and benefits guide).
Read chapter 5 and appendix 7 of the 480 expenses and benefits guide and paragraph 32 in part 5 of the Class 1A National Insurance contributions on benefits in kind (CWG5) guide for further information.
Incidental overnight expenses
Go to the box under ‘Incidental overnight expenses’ at section M of the P11D for details of prescribed limits. Enter details in box N of incidental expenses payments exceeding the prescribed limits which are made up of a cash payment, non-cash vouchers or a credit card payment.
Read chapter 8 and appendix 8 of the 480 expenses and benefits guide and paragraph 31 in part 5 of the Class 1A National Insurance contributions on benefits in kind (CWG5) guide for further information.
Enter details of expenses incurred in, or in connection with, the provision for the director or employee of any benefits or facilities of whatever their nature not returned under any previous heading.
Additional HMRC Documentation and external help
Click the links below to go directly to the HMRC website to download or view the PDF or help files listed below.
Manual data entry
Benefit and expenses records are assigned to a selected 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 N benefit:
|STEP 1||Select the employee record to that you wish to assign the benefit to|
|STEP 2||Select benefit section “Section N” from the drop-down benefit selector – or click on the “Section N” icon at the top of the screen.|
|STEP 3||Click the ADD button.|
|STEP 4||Select from the list of existing benefit descriptions for this P11D section and click OK - or click the Add button if you want to enter a new benefit description of your own.|
|STEP 5||Enter the details of the benefit in order to allow the system to correctly calculate the benefit in kind value.|
Having entered the necessary details of the benefit, click on SAVE to save the record.
All records will be displayed chronologically as below:-
The system can import data in numerous file types but a CSV (comma separated values) file recommended, it removes the complexities of Excel formulas and formatting.
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
Try to remove all data above header row, below the last record and after the last column of data. This just helps the software interpret the data correctly.
The final column of data should contain consistent data i.e. a value in every cell. This ensures that the software moves to the ‘next row’ at the correct time. As you can select the data that is imported, it is sometimes wise to simply paste a column of ‘xxx’ on the far right to provide an import end.
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.
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.
The column order in the spreadsheet is not important, as the P11D Organiser will automatically map as many fields as it can, and will remember the settings made during the import process as a configuration file for future use.
Certain other fields must also be included in order for the import routine to correctly allocate/calculate benefits particular to individual import routines. These Compulsory fields are also clearly highlighted in the tables.
The remainder of data that can be imported is categorised as Optional and is displayed in standard type.
Data Fields table - Expense Payments Made To Or On Behalf Of Employees
|Information||P11D Field code||Type||Field Length||Inclusion||Pre-Format|
|Value of Benefit/Expense||CASHEQV||Numeric||10||Compulsory|
|Cash Foregone ||CASHFGONE||Numeric||10||Optional|
|Description of Benefit||DESCRIPTIO||Character||50||Compulsory|| |
|Amount Made Good||MADEGOOD||Numeric||10||Optional|| |
|NI Number||NI_NUMBER||Character||10||Key field|| |
|Additional line of description||NOTES||Character||30||Optional|| |
|Payroll Number||PAYROLL||Character||20||Key field|| |
|Payrolled Value ||PAYROLLED||Numeric||10||Optional|
|Premium Paid||PREMIUM||Numeric||10||Compulsory|| |
Step by step guide to importing data
Select FILE > IMPORT WIZARD (or use the system IMPORT icon to go to the Import wizard)
Select the Import routine to run: N - Expenses payments made to, or on behalf of, the employee 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.
MAP SOURCE DATA TO TARGET FIELDUsing 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 HERETO 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 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.
Example: Missing date value in record
Example: Unrecognised employee record (PAYROLL) number
|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:-
|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
COMMIT DATA CHANGEThe 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 DATAFolder is recommended as it gives you a restore point prior to committing the changes being made during the import.
EXIT IMPORT ROUTINE OR DEAL WITH ERRORS
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.
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.