Tax Tip 19: How to reduce the burden of completing a P11d every year

Accountants and business owners break out in a rash every June as they get ready to prepare the annual P11d forms. The P11d records the expenses and benefits paid to employees earning over £8,500 p.a.. These can include company cars, healthcare, subscriptions and travel expenses. Speaking from experience, these are complicated to prepare and require some detailed information gathering.

Help is at hand from the taxman in the form of a P11d dispensation.

A dispensation is a notice from HM Revenue & Customs (HMRC) that removes the requirement to report expenses and benefits to them at the end of the year on forms P11D or P9D. There is also no need to pay any tax or National Insurance contributions (NICs) on items covered by a dispensation.

Once granted, dispensations last indefinitely. But HMRC reviews them regularly (usually at intervals of five years or less) to make sure that the conditions under which they were issued still apply.

What items can and can’t be covered by a dispensation?

You can apply to HMRC for a dispensation to cover expenses or benefits for which your employee gets a full tax deduction.

The main expenses routinely covered by a dispensation are:

  • travel, including subsistence costs associated with business travel
  • fuel for company cars
  • hire car costs
  • telephones
  • business entertainment expenses
  • credit cards used for business
  • fees and subscriptions

Systems you must have in place

You must have an independent system in place for checking and authorising expenses claims. At a minimum, this means having someone other than the employee claiming the expenses check that the:

  • amount claimed isn’t excessive
  • claim doesn’t include disallowable items

If it is not possible for you to operate an independent system for checking and authorising expenses claims – for example, because you are the sole director of your company and you have no other employees – you will only be able to obtain a dispensation if you:

  • ensure all expenses claims are supported by receipts for the expenditure
  • demonstrate that the claim relates to expenditure that can be covered by a dispensation – your receipts may be sufficient for this purpose, but if not you must retain additional information

As always, check with your accountant to get more advice on a P11d dispensation.

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