News
September 2008
P11D’s and Dispensations
Every year an employer, whether it be a limited company, partnership or sole trader, has to complete form P11D for each of its employees who earn at the rate of £8,500 per annum and almost all company directors.
Form P11D is a mechanism whereby you record benefits provided or expenses reimbursed to employees during the tax year. The basic rule is that if you provided an employee with anything other than pay it may count as a benefit or expense that may be taxable. Common examples include company cars, health insurance, travel and entertainment expenses. Certain benefits such as company cars or health insurance will always be taxable.
If an employee has expenses reimbursed which are wholly for business purposes they can make what is know as a Section 336 claim which is their confirmation that the expenses was incurred wholly for business purposes .However, the expense still needs to be recorded on form P11D.
An alternate from having to complete these forms is for the employer to make an application to HM Revenue & Customs for a Dispensation.
Once granted, The Dispensation lasts indefinitely, cuts down on the paperwork and avoids the need to report expenses that are incurred purely for business purposes. In addition the employee will not have to record the expense on their personal Tax Return or make a separate claim for tax relief on the expense.
In making the application the employer will have to satisfy HM Revenue & Customs that it has an independent system in place for checking and authorising expenses claims. This usually means someone other than the claimant checks the claim to ensure it is not excessive or the claim does not included any disallowable items.
If you are a sole director you will need to demonstrate that all expenses are supported by receipts and the type of expenditure is covered by a dispensation.
Forms P11D have to be completed and submitted to HM Revenue & Customs by 6 July each year with penalties arising for late submission and incorrect Returns. It therefore makes sense to apply for a Dispensation now to cut down on your 2009 filings.
If you require any further information please contact Graham Meager.
