This time of year is very busy for employers with the filing deadlines for various forms.
Employer year-end return – form P35
The deadline for the submission of the Employer Annual Return (P35) was 19 May 2012 and most companies are now obliged to file their return online. If you are an employer and have not filed your Employer Annual Return yet then you should now do so as soon as possible as penalties can be charged for late submission.
Return of expense payments and benefits – form P11D
The next deadline is for 2011/12 forms P11D which are an employer’s return of expense payments and benefits paid to employees and which must be submitted to H M Revenue & Customs (HMRC) by 6 July 2012.
Class 1A National Insurance Contributions at 13.8% are payable by the employer on certain benefits and this liability is due for payment on 19 July 2012.
There is a common misconception that business-related expenses paid to a director/employee do not have to be shown on a P11D. This is not the case, unless the company has a dispensation – see below. If there is no dispensation in place then all expenses and benefits paid or provided to or on behalf of a director/employee must be shown on a P11D. This will include:
• Amounts paid to an employee
• Amounts paid on the employee’s behalf, whether in cash or on a company credit card
• Expenses incurred by the employee and reimbursed to him
The amounts declared on the P11D will be taxable on the employee, but the employee can make a claim to HMRC that any business-related expenses/benefits paid to him or on his behalf should be deducted from the amount declared and so not be taxable on him; this is done by way of either a claim on a Self Assessment tax return or by an adjustment in the individual’s PAYE code.
Common expenses and benefits which you may need to consider are as follows:
Travel expenses: paid either to or for your employee must be declared – if these relate to business a claim may be made by the employee as above; home to place of business travel is not considered to be business-related.
Entertaining: both client and staff entertaining must be included; an employee can generally make a claim to deduct business-related entertaining; staff entertaining is exempt from tax and does not have to be declared if it is an annual event (such as a Christmas party), which is open to all staff and the cost of which is less than £150 per head – if the cost is over £150 per head then the whole amount is taxable on the employees.
Mileage allowance for use of employee’s own car – this will be tax-free, and therefore does not have to be declared, if the amount paid is within HMRCs authorised mileage rates which are available on www.hmrc.gov.uk . If the amounts paid exceed the allowed rates, then the excess will be taxable.
Private medical insurance – the amount paid to or on behalf of each employee must be shown.
Subscriptions – the amount paid must be declared – the employee may make a claim to deduct work-related subscriptions and HMRC publish a list of professional bodies, subscriptions to whom are accepted as being business-related.
Company cars – where any private use is allowed, the taxable benefit is calculated by reference to the car’s CO2 emissions and its cost. Where fuel is also provided an additional taxable benefit will arise.
Telephone expenses – where the company pays for an employee’s home or mobile telephone, the amount paid must be declared; a claim by the employee for business-related use can be made.
Where a company regularly pays expenses – such as travel or entertaining – all of which are business-related so that claims by the employees are allowed, the company can apply to HMRC for a dispensation from the need to report these expenses. If HMRC are satisfied that the company’s systems ensure that only business expenses are paid, then a dispensation will be granted and the expenses covered by the dispensation no longer need to be declared on the P11D.
Return of Employment-Related Securities – Form 42
Where any transactions have taken place involving the company’s shares, a form 42 may be required. This form discloses to HMRC any transactions involving directors/employees and which have taken place by reason of employment with the company. The issue of shares on incorporation or the transfer of shares between family member swill not generally have to be declared. The deadline for the submission of From 42 for 2011/12 is 6 July 2012.
Disclaimer
Umesh Modi BA ACA, is a Chartered Accountant and Tax Advisor, and a partner at Silver Levene (Incorporating Modiplus+). He can be contacted on 020 7383 3200 or umesh.modi@silverlevene.co.uk