P11D Deadline: Mandatory Payrolling Approaches

End of an Era

As the 5th of April deadline to register with HMRC in order to voluntarily payroll benefits and expenses passes, thoughts turn to what could well be the last mass P11D season. This is because it will be mandatory to payroll most benefits and expenses next year.

Mandatory Implementation

It has been a long road to this point, with P11Ds having been introduced in the early 1960s. The voluntary payrolling option having been available since April 2016. The mandatory implementation date having been delayed from April 2026. No doubt there will be hiccups along the way as businesses and HMRC alike get to grips with such a fundamental change.

Do You Need P11Ds?

Whilst contemplating the change and what needs to be done, it is also an ideal time to assess whether there is the need to complete P11Ds at all. In some instances, which of course may also mean that payrolling may not be required either.

What is a PAYE Settlement Agreement (PSA)?

A Pay As You Earn (PAYE) Settlement Agreement, generally referred to as a PSA, is a mechanism via which an employer can make one annual payment (on behalf of their employees) to cover all the Tax and NICs that may be due on certain types of expenses or benefits. If a PSA is in place, the benefits included in the agreement (with HMRC) would not have to be reported on each employee’s P11D.

Potential Savings

In our experience it is an option that is often overlooked and one which could well save time in terms of resource allocation and, possibly, money. Not only that, it could also boost employee morale given the backdrop of the cost-of-living crisis.

Rules Around PSA

Of course, there are strict rules which must be satisfied in order to get a PSA, which in essence require that the expenses or benefits be minor, irregular or impracticable to place a value on them.

What Types of Expenses or Benefits Qualify for a PSA?

Minor Benefits and Expenses

Minor benefits and expenses could include such things as long service awards, small gifts, vouchers or staff entertainment such as a ticket to a sporting event.

Irregular Benefits and Expenses

Irregular benefits and expenses are things that are not paid at regular intervals during a tax year, and employees do not have a contractual right to them. Examples include the cost of attending conferences, relocation expenses over the £8,000 tax-free limit and use of company owned accommodation.

Impracticable Expenses and Benefits

Impracticable expenses and benefits include such things as shared cars, staff entertainment and, potentially, anything that is difficult to put a value on or divide up between employees.

PSA Application Deadline

The deadline to apply for a PSA is 5th July following the first tax year for which you would like it to apply. The resultant Tax and NIC must be paid by 22nd October (or 19th October if payment is by post) following the tax year to which it applies.

P11D Key Deadlines

The deadlines for P11Ds are as follows:

• 6th July — submission of both P11Ds and forms P11D(b)
• 6th July — to provide a copy of the information to employees
• 22nd July (or 19th July if paying by cheque) — to pay Class 1A NIC

The Trivial Benefits Exemption

On going through the process, there is the possibility of saving money. It is worth keeping in mind that certain benefits and expenses may not need to be reported at all if they fall within the Trivial Benefit exemption. Potentially, there would be no tax consequence if the benefit provided meets a specific criteria:

Criteria

• It cost you £50 or less to provide
• It isn’t cash or a cash voucher
• It isn’t a reward for performance or work
• It isn’t a contractual entitlement

Speak to an Expert

Expenses and Benefits is a complex area all of its own, and a review of such provision may well prove a very worthwhile exercise. If you would like assistance or advice, please contact us for support.

Disclaimer: Chartergate Legal Services Ltd has drafted this article to provide you with a general overview of the relevant law and developments at the date of publication only. It is not a substitute for professional advice that is specific to your circumstances and should not be relied upon as such.