The rules governing expenses and benefits can be lengthy and complicated – and with tax rates on the increase and HMRC penalties for mistakes and omissions also increasing, it is more important than ever to review what you are doing and plan ahead.
Form P11D guidance
Most businesses are required to file an annual P11D Return, including a declaration if no benefits were provided. There are penalties for failing to submit a P11D, as well as for incomplete or incorrect forms. Omitted benefits-in-kind are the most common type of failure discovered by HMRC during an Employer Compliance Review.
With regard to Form P11D , which details expenses and benefits provided to employees and directors, the maximum penalty for submission after the 6 July deadline is £300 plus a further £60 per day per form, once the initial penalty has been imposed, for as long as the forms remain outstanding. Employers must also provide copies of the forms to all relevant employees by 6 July, whether or not they continue to be employed. Any delay in providing this information to employees or former employees may result in similar fines.
If Form P11D is incorrectly completed, there is a penalty of up to £3,000 per form. The P11D(b) is required to include details of the Class 1A NIC payable and must be submitted to HMRC along with Form P11D itself. If not submitted by 6 July, a penalty may be charged of up to £1,200 (£100 per month) per 50 employees (or part thereof) in addition to the penalties for Form P11D. The Class 1A NIC is due by 19 July if paying by post or 22 July if paying electronically. Interest and penalties will be charged where payment is made late.
In view of the severe penalties in place for the submission of incorrect P11D Forms, it is essential that all relevant benefits are identified and properly included.
Our team of tax specialists can guide you through the process, ensuring you supply both correct and timely information to HMRC.
Salary Sacrifice – Save Income Tax and National Insurance!
For years, salary sacrifice schemes would save National Insurance contributions (NIC) for employers and both Income Tax and NIC for employees. It would also help retain key employees with a generous flexible benefits scheme.
However, changes were made to salary sacrifice schemes from 1 April 2017 which saw the tax and NIC savings available on many benefits withdrawn. Employers need to be aware of the changes so that they can advise their employees and rework their payroll. There are transitional rules that apply to schemes already in place prior to April 2017 whereby the tax and NIC treatment is protected until either April 2018 or April 2021 depending on the type of benefits included within the scheme.
The changes are fairly complex but they do not mean the end of salary sacrifice. HMRC recognises that flexible benefit schemes are an important part of remuneration strategy and so certain benefits have been excluded from the changes. Employers and employees can continue to benefit from savings under salary sacrifice where benefits such as childcare vouchers, workplace nurseries, cycle to work schemes and gym benefits are provided.
Smailes Goldie can help you reform a salary sacrifice scheme, while our payroll bureau, SG Outsourcing, can assist in the administration of all payroll-related tasks.
Call our specialist payroll team now for a free, initial consultation or request a call back.