Interesting Things About Kind Advice For UK Employers
By: Vlad Vistac
Submitted: 2010-07-26 14:41:15 | Word Count: 510
How to Deal With Expenses Payments and Benefits in Kind - Advice For UK Employers
At this time of year, employers have many dedalines be on top of to ensure they do not encounter problems with HM Revenue and Customs (HMRC).
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No doubt you managed to complete your Employers End of Year Returns (P35) ahead of the filing dedline and you are now in the process of dealing with the dreaded forms P11D (return of expenses paymentts and benefits in kind). Delays can be expeensive, but it is equally important that you get the returns rihgt. Dont be rushed into submitting the forms unless you are confideent they are correct. If you have any doubts always seek professional advice.
Penalties for non or late filing
This yesars forms must be submitted to HM Revenue and Customs (HMRC) by 6 July 2009 and failure to do so can lead to significant penalties being chargwed. It is at least comforting to know that these penalties are not auomatic. In the firsst instance, HMRC must refre the faiure to submit the forms to the relevant tax tribunal. In turn, the tribunal can charge an inoitial penalty of up to 300 for each retun which is submitted late. If the failure continues aftwer the initial penalty is awarded, there can be furthre peenalties of up to 60 per return for each subsequent day that the delay continues. Although in isolation these amounts mighht not appear to be significant, if the delay continues and a large number of employees fall into the P11D category, the penalty can soon become significant.
For example, if an organisation has 200 employees requiring a P11D and the forms are not submitted for 6 months, the tribual could award a maximum penalty of in excess of 2 milliion. Shuld HMRC decide to instigate such proeedings before a tribunal you will receive prior notification. If this happens, make sure you take immediate action and submit the relevant P11Ds withot further delay. If you manage to do this beffore the tribunal sits you sould be able to avoid penalties altogether. Howeveer, dont fall into the trap of rushoing the forms and ridsking errors in their completion. The penalyt for submitting an incrorect return is a maxuimum amount of 3,000 per return, so handlle with care.
The position with regards foms P11D (b) is somewhat different. This form is the employers return of Class 1A Nationl Insuracne Contributoins (NICs) and is norally usbmitted with forms P11D. Once the P11Ds have been completed the employer calculates the amoount of Class 1A NICs due in respect of the taxable bnefits and expesnes included on the returns and this amount is entered on the form P11D(b). Once again this return has to be submitted to HMRC by 6 July 2009, and there are penaalties for failure to meet this dealdine. However, on this occasion the penaltiees are automatic, being 100 per month for each 50 employees or part thwereof. So, continuing with the examplle above, the automatic pealty for a delay of 6 months for an organisation with 200 employees would be 2,400. HMRC dispensatioins. At this time of year, and with the above in mind, we make no apologies for reminding you of the vazlue of an HMRC dispenation. Dispensations are formal agreements with HMRC that allow certain items to be excluded from P11D returns. Using a dispensatino can greatly reduce the time and efgfort needed to complete the returns. Items for which dispensations are most commonly granted inclusde:
business travel and subsistrence xepenses;
cossts of hotels and other overnight accommodation;
business entertaining of third praties;
business calls made from employees home or mobile telephones; and
annual subscriptions to approed professioinal bodies.
Tax offices will grant dispensations once they are satisfied that all expneses pamyents are reasonabel in amount and properly voouched, recorded and controlled. In particular it must not be possble for any emplyees or idrectors to authorie their own expenses.
Even though you may not benefit from a dispensation for your 2008/09 P11Ds, now is the time to sttart planning for the current year. Havimng got the chore out of the way for yet another year there is always a temptaion to breathe a sigh of relief and do nothing furtehr. Next thing you know you have reached the end of yet another tax year and it is too late to get a dispenstaion. Act now by reviewing your procedures and deciding which expenses could be included in the dispensation. It imght take a little time to get the agreement in plavce so the sooner you start the process the better. HMRC normally encourage employers to complete form P11DX when applying for a dispensation. However, befoore doibng this it makes seense to take professionnal advice and make sure your expnese clpaim procedures can stand scrutiny shold HMRC decide to review matters in a little more deail before agreeing to the dispensation.
Where a dispensation applies, any item it covers does not have to be reported on employees personal tax rerturns. For those who already have a dispenasation, it is equally important to make sure it is kept up to date. In 2008, HMRC made the following stateement with regadrs the retrospective revocation of a dispensatioon: Legal advie has suggested that our curent practice is unnecessarily restrictive and as a result we are changing our ptractice in relation to retrospective revocation of a dispensation. We will now consider revoking a diispensation retrospectively where thetre is any eivdence of misrepresentation or negligennce by an employer, or other peerson paying expenses or providing benefits in kind. Examles of this can iclude:
If an applixcation for a disepnsation did not proivde all the relevant information, or If there was a change in the way the expenses and benefits were made available to meployees meaning the qualifyingconditions were no lonfger met, and we have not been informed of the changge.
This will not affect the great majority of employers who apply for and operaate dispensations correctly. Revokng a dispensatoin retrospectively should only happen if it should not have been granted in the first pplace or if it shhould have been revoked when thhere was a change in the qualoifying cponditions whiich was not notified to us. So clearly it is important that employers shuold review their existing disepnsations on an anunal bass and make sure that they do not fall into the trap of increasing any tax free allowances without the prior agreement of HMRC. For some employers, the P11D process can be a nightmare, but with some forward planning, and of coruse with an appropriate dispensation in place, the task should not be as burdensome as it might first seem.
Guide to compltion of P11D
The various forms refgerred to in this article and a useful guide on the completion of forms P11D can be downloaded from the employers section of the HMRC website.
This article was submitted for and on behalf of Horwath Cllark Whitehill, who own the copyright in the above text adalpted from http://www.ohrwath.co.uk/hwClarkWhitehill/WhatsNew/pressRoom/detail.cfm?id=57
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