A quick guide on how to manage costs and expenses as a work from home landlord

Managing a rental business from home

A landlord will often manage their property rental business from home, and in doing so will incur additional household expenses, such as additional electricity and gas, additional cleaning costs, etc. As with other expenses, the landlord can claim a deduction for these when working out the profits of the rental business.

Most unincorporated landlords will now prepare accounts on the cash basis.

Wholly and exclusively incurred

The basic rule for an expense to be deductible in computing the profits of a rental business is that the expenses relate wholly and exclusively to that business. This applies equally to a deduction for household expenses – they can be claimed where they relate wholly and exclusively to the rental business.

Actual costs

Where the expenses are wholly and necessarily incurred, a deduction can simply be claimed for the actual expenses. In reality, this will take some working out as household bills will not be split between personal and business expenses. Any reasonable basis of apportionment can be used – such as floor area, number of rooms, hours spent etc. Records should be kept, together with the basis of calculation.

Simplified expenses

Where a landlord spends more than 25 hours a month managing the business from home, the simplified expenses system can be used to work out the deduction for the additional costs of working from home. The expenses depend on the number of hours worked in the home each month, and the deduction is a flat monthly amount, as shown in the table below.

Hours of business use per monthFlat rate per month
25 to 50 hours£10
51 to 100 hours£18
101 hours or more£26

The hours are the total hours worked at the home by anyone in the property rental business.

Example

Nadeem runs his property rental business from home. In 2018/19, he spends 60 hours a month working on the business in all months except August and December, in respect of which he spends 30 hours in each on those months working on the business.

For 2018/19 he is able to claim a deduction of £200 for expenses of running his business from home (10 months @ £18 plus 2 months @ £10).

The simplified expenses rule does not cover telephone and internet, which can be claimed in addition to the deduction for simplified expenses.

Partner note: ITTOIA 2003, Pt. Ch. 5A, Pt. 3

To find out more please follow us on Facebook , Twitter or LinkedIn. Feel free to contact us on 0333 006 4847 or request a call back by texting to 075 6464 7474

The letting of a jointly-owned property in itself does not give rise to a partnership, so what does?

Property partnerships

A person may own a property jointly that is let out as part of a partnership business. This may arise if the person is a partner of a trading or professional partnership which also lets out some of its land and buildings. A less common situation is where the person is in a partnership that runs an investment business which does not amount to a trade, but which includes or consists of the letting of property.

When is there a property partnership?

The letting of a jointly-owned property in itself does not give rise to a partnership – and indeed a partnership is unlikely to exist where joint owners simply let a property that they own together. Whether there is a partnership depends on the degree of business activity involved and there needs to be a degree of organisation similar to that in a commercial business. Thus, for there to be a partnership where property is jointly owned, the owners will need to provide significant additional services in return for money.

Separate rental business

A partnership rental business is treated as a separate business from any other rental business carried on by the partner. Thus, if a person owns property in their sole name and is also a partner in a partnership which lets out property, the partnership rental income is not taken into account in computing the profits of the individual’s rental business – it is dealt with separately.

Further, if a person is a partner in more than one partnership which lets out property, each is dealt with as a separate rental business – the profits of one cannot be set against the losses of another.

Example

Kate has a flat that she lets out. She is also a partner in a graphic design agency, which is run from a converted barn. The partnership lets out a separate barn to another business.

Kate has two property rental businesses. One business comprises the flat that she owns in her sole name and lets out, and the partnership rental business consisting of the barn which is let out as a separate rental business. This is a long-term arrangement.

Kate must keep her share of the profits or losses from the partnership property business separate from those relating to her personal rental business. She cannot set the profits from one against losses from the other. They must be returned separately on her tax return.

Partner note: HMRC’s Property Income Manual at PIM1030.

To find out more please follow us on Facebook , Twitter or LinkedIn. Feel free to contact us on 0333 006 4847 or request a call back by texting to 075 6464 7474

Today’s blog covers taxing rental deposits – what’s the most you’ve spent repairing after a tenant has moved out?

Rental deposits

A landlord will usually take a deposit from a tenant when letting a property to cover the cost of any damage caused to the property by the tenant. Where a property is let on an assured shorthold tenancy, the tenants’ deposit must be placed in an official tenancy deposit scheme.

The purpose of the deposit is to cover items such as damage to the property that extends beyond normal wear and tear. The items covered by the security deposit should be stated in the letting agreement.

The deposit charged cannot now exceed five weeks rent.

Is it taxable?

The extent to which the deposit is included as income of the rental business depends on whether all or part of the deposit is retained by the landlord. In a straightforward case where a security deposit is taken by the landlord, held for the period of the tenancy and returned to the tenant at the end of the rental period, the deposit is not included as income of the property rental business.

However, if at the end of the tenancy agreement the landlord retains all or part of the deposit to cover damage to the property, cleaning costs or other similar expenses, the amount retained is included as income of the property rental business. The retained deposit is a receipt of the business in the same way as rent received from the tenant. However, the actual costs incurred by the landlord in making good the damage or having the property professionally cleaned are deducted in computing the profits of the business.

The retained deposit is reflected as rental income of the property rental business for the period in which decision to retain the deposit is taken, rather than for the period in which the deposit was initially collected from the tenant.

Example

Kevin purchases a property as a buy to let investment. He collects a security deposit of £1,000 from the tenant. The terms of the deposit are set out in the tenancy agreement.

The let comes to an end in July 2019. When checking out the tenant, it transpires that the tenant has failed to have the carpets cleaned, as per the terms of the agreement, and also that he has damaged a door, which needs to be repaired.

After discussion, Kevin and the tenant agree that £250 of the deposit will be retained to cover cleaning and repair costs. The balance of the despot (£750) is returned to the tenant in October 2011.

Kevin spends £180 having the property professional cleaned and £75 having the door repaired.

When completing his tax return, he must include as income the £250 retained from the tenant. However, he can deduct the actual cost of cleaning the property (£180) and repairing the door (£75). As the amount actually spent (£255) exceeds the amount retained, he is given relief for the additional £5 in computing the profits of his property rental business.

The balance of the deposit returned to the tenant is not taken into account as income of the business.

Partner note: ITTOIA 2003, Pt. 2.

To find out more please follow us on Facebook , Twitter or LinkedIn. Feel free to contact us on 0333 006 4847 or request a call back by texting to 075 6464 7474

Are you prepared for the dividend allowance cut on your January 2020 tax return?

Dividend complexities

The dividend allowance, which was originally introduced from 6 April 2016, was cut from £5,000 a year to £2,000 from 6 April 2018. The cut is likely to have a significant impact on employees and directors of small businesses who receive both salary and dividend payments.
Many family-owned companies allocate dividends towards the end of their financial year and/or the tax year, so it was not until March/April 2019 that the impact of the reduction first started to hit home. Unfortunately, many other taxpayers may not become aware of the change until they complete their 2018/19 tax return, which in most cases, will be due for submission to HMRC by 31 January 2020.
How much tax is paid on dividend income is determined by the amount of overall income the taxpayer receives. This includes earnings, savings, dividend and non-dividend income. The dividend tax will primarily depend on which tax band the first £2,000 falls in.

The tax rates on dividend income, above the allowance, remain at 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers.
For a basic rate taxpayer, the reduction in the allowance means an increase in tax paid on dividends of £225. For a higher rate taxpayer, the reduction increases the annual tax bill on dividends by £975, and for additional rate taxpayers, the increase is £1,143. Note that if dividend income falls between multiple tax bands, these figures will be different.
Dividend income is taxed at the taxpayer’s highest rate. This can often work in the taxpayers favour, particularly where a mixture of salary and dividends is received. For example, if a director receives a salary of £40,000 and a dividend of £12,000, their tax liability for 2019/20 will be as follows:

 

In this example, personal allowances are deducted first against the salary, leaving £27,500 of other income falling within the basic rate tax band (£37,500 for 2019/20). Dividend income falling within the basic rate band is £10,000 (£37,500 minus £27,500 used), with the remaining £2,000 falling above the basic rate limit. The dividend nil rate is allocated to the first £2,000 of dividend income, falling wholly within the basic rate band, leaving £8,000 within the basic rate band and taxable at the lower 7.5% rate. The remaining £2,000 of dividend income is taxable at the dividend upper rate of 32.5%.

Individuals who are not registered for self-assessment generally do not need to inform HMRC where they receive dividend income of up to £2,000. Those with income between £2,000 and £10,000 will need to report it to HMRC. The tax can usually be paid via a restriction to the PAYE tax code number, so that it is deducted from salary or pension. Alternatively, the taxpayer can complete a self-assessment tax return and the tax can be paid in the usual way (generally 31 January following the end of the tax year in which the income was received). Those receiving more than £10,000 in dividends will need to complete a tax return.

The allocation of various rate bands and tax rates can be complicated, even in situations where straight-forward dividend payments are made. Family business structures may be particularly vulnerable to the impact of the reduction in the dividend allowance, especially where multiple family members take dividends from the family company. A pre-dividend review may be beneficial is such cases.
Partner Note: ITA 20017, s 8 and s 13A

To find out more please follow us on Facebook , Twitter or Linkedin. Feel free to contact us on 0333 006 4847 or request a call back by texting to 075 6464 7474

 

Do you visit other offices or are you seconded to a different workplace? Make sure you’re getting the tax benefits

Travel expenses and the 24-month rule

As a general rule, employees are denied a tax deduction for the cost of travel between home and work. Likewise, subject to a few limited exceptions, if the employer meets the cost of home to work travel, the employee is taxed on it.

One of the main exceptions to this rule is where an employee attends a ‘temporary workplace’. This is a workplace that the employee goes to in order to perform a task of limited duration or one that he attends for a temporary purposes, even if the attendance is on a regular basis.

Example 1

Polly is based in the Milton Keynes office. She is seconded to the Bedford office for 12 months to cover an employee’s maternity leave. At the end of the secondment, she will return to the Bedford office.

The Bedford office is a temporary workplace.

Consequently, Polly is allowed a deduction for travel from her home to the Bedford office.

Example 2

James is a health and safety officer. He is based in the Liverpool head office. Each week he visits factories in Manchester and Bury to carry out safety checks. The factories are temporary workplaces as each visit is self-contained.

Consequently, James is allowed a deduction for travel expenses incurred in visiting the factories, even if he travels there from home.

24-month rule

A workplace does not count as a temporary workplace if the employee attends it in a period of continuous work which lasts, or is expected to last more than 24 months. A ‘period of continuous work’ is one where the duties are performed at the location in question to a ‘significant extent’. HMRC regard duties being performed to a ‘significant extent’ at a particular location if an employee spends 40% or more of their working time there.

The upshot of this rule is that where the employee has spent, or is likely to spend, 40% of their working time at the location in question over a period of more than 24 months, that location will be a permanent location rather than a temporary location. Consequently, home to work travel is ‘ordinary commuting’ (travel between home and a permanent workplace), which is not deductible.

It is important to appreciate that both parts of the test must be met for the workplace to be a permanent workplace – more than 40% of time spent there and over a period of more than 24 months.

Example 3

George is employed full-time at a care home in Southampton, a role which he has held for four years. He is sent to full-timework at a new care home in Bournemouth for three years, after which time he will return to the Southampton care home.

Although the move to the Bournemouth posting is not permanent, the posting lasts more than 24 months and, as such, the Bournemouth home does not qualify as a temporary workplace. 

Consequently, George is not allowed a deduction for the cost of travelling from home to the Bournemouth care home.

Change of circumstances

Circumstances can and do change. If at the outset a posting is expected to last 24 months, the workplace will be treated as a temporary workplace. If later the posting is extended so that it will last more than 24 months, the workplace ceases to be a temporary workplace from the date that it becomes apparent the posting will exceed 24 months.

Fixed term appointments rule

An employee undertaking a fixed-term appointment is not entitled to relief for home to work travel, even where it lasts less than 24 months, if the employee attends the workplace for all, or almost all of the period which they are likely to hold the appointment.

Example

Imogen takes on a 12-month contract at an office in Marlow. Although the appointment is less than 24 months, the Marlow office is not a temporary workplace as Imogen works there for duration of the contract.

Tax exemption

If the employer pays or reimburses travel expenses which would be deductible if met by the employee, the payment or reimbursement is exempt from tax.

Partner note: ITEPA 2003, ss. 289A, 338, 339;

To find out more please follow us on Facebook , Twitter or Linkedin. Feel free to contact us on 0333 006 4847 or request a call back by texting to 075 6464 7474

Employing family members

It is permissible for a business to claim a tax deduction for the cost of a reasonable wage paid to a family member who helps in the business. Their duties could, for example, include answering the phone, going to the bank, bookkeeping and other administrative tasks.

The tax legislation specifies that ‘in calculating the profits of a trade, no deduction is allowed for expenses not incurred wholly and exclusively for the purposes of the trade’, which indicates that as long as the work is undertaken, the payments are realistic and actually made, there should not be a problem with claiming tax relief.

The benefits of spreading income around family members where possible include maximising the use of annual personal tax allowances (£12,500 per individual (children and adults) in 2019/20), and potentially taking advantage of nil and lower rate tax thresholds.

‘Family’ could include anyone who depends on the owners of the family business for their financial well-being (for example, elderly relatives and/or long-standing domestic staff members), but care must be taken not to fall foul of the ‘settlements’ legislation and other anti-avoidance measures in force at the time.

Keeping records

The tax deductibility of wages paid through a business has recently been examined by the Tax Tribunal. The business owner claimed that wages paid to his son had been paid partly through the ‘provision of goods’. He managed to substantiate some cash payments and a monthly direct debit (for insurance costs) by reference to his son’s bank statements. However, the bulk of the claim was based on buying food and drink to help support his son at university. Unfortunately, the tribunal concluded that the payments were made out of ‘natural parental love and affection’. There was a duality of purpose as the ‘wages’ had a major underlying ‘private and personal’ motive, and thus not for the purposes of the trade. The tribunal subsequently dismissed the appeal on the grounds that the business owner was doing nothing more than supporting his son at university.

The outcome of this case could have been very different if the business owner had used an alternative methodology for paying his son’s wages. In particular, the judge noted that had payment been made on a time recorded basis or using some other approach to calculate the amount payable, and had an accurate record been maintained of the hours worked and the amount paid, it is unlikely that the deduction would have been denied.

In particular, this case highlights the importance of maintaining proper records regarding the basis on which payments are to be made to children. A direct link between the business account and the recipient’s account would clearly be advisable.  For example, if the business owner had paid the wages directly into his son’s bank account, leaving the son to purchase his own food and drink from the money he earned from his father, bank statements could subsequently have been used to provide evidence of what had been paid and this could be linked to the record of hours worked. Maintaining the link is the key issue here.

Rate of pay

It is also worth noting that HMRC examine whether a commercial rate is being paid to family members. The concept of ‘equal pay for equal value’ should help prevent a suggestion of dual purpose and thus, in turn, should also help refute allegations of excessive payments to family members as a means of extracting monies from the business.

Finally, wherever payments are made to family member, legal issues such as the national minimum wage should also be borne in mind.

Partner Note: ITTOIA 2005, s 34; Nicholson v HMRC [2018] TC06293

Is the summer party tax-free?

A statutory exemption exists, which allows employers to meet the cost of certain social events for staff without triggering a liability to tax or NICs, providing certain conditions are met.

The legislation refers to ‘an annual party or similar annual function’. Although HMRC do not seem to interpret this to mean that the same event must be held every year, it may be prudent to check the issue in advance where a one-off event is planned.

Conditions

A staff event will qualify as a tax-free benefit if the following conditions are satisfied:

  • the total cost must not exceed £150 per head, per year
  • the event must be primarily for entertaining staff
  • the event must be open to employees generally, or to those at a particular location, if the employer has numerous branches or departments

The ‘cost per head’ of an event is the total cost (including VAT) of providing:

  1. the event, and
  2. any transport or accommodation incidentally provided for persons attending it (whether or not they are the employer’s employees), divided by the number of those persons.

Provided the £150 limit is not exceeded, any number of parties or events may be held during the tax year, for example, there could be three parties held at various times, each costing £50 per head.

The £150 is a limit, not an allowance – if the limit is exceeded by just £1, the whole amount must be reported to HMRC.

If there are two parties, for example, where the combined cost of each exceeds £150, the £150 limit is offset against the most expensive one, leaving the other one as a fully taxable benefit.

Example

ABC Ltd pays for an annual Christmas party costing £150 per head and a summer barbecue costing £75 per head. The Christmas party would be covered by the exemption, but employees would be taxed on summer barbecue costs, as a benefit-in-kind.

Tax treatment for employers

The cost of staff events is tax deductible for the business. The legislation provides a let-out clause, which means that entertaining staff is not treated for tax in the same way as customer entertaining. The expenses will be shown separately in the business accounts – usually as ‘staff welfare’ costs or similar.

There is no monetary limit on the amount that an employer can spend on an annual function. If a staff party costs more than £150 per head, the cost will still be an allowable deduction, but the employees will have a liability to pay tax and National Insurance Contributions (NICs) arising on the benefit-in-kind.

The employer may agree to settle any tax charge arising on behalf of the employees. This may be done using a HMRC PAYE Settlement Agreement (PSA), which means that the benefits do not need to be taxed under PAYE, or included on the employees’ forms P11D. The employer’s tax liability under the PSA must be paid to HMRC by 19 October following the end of the tax year to which the payment relates.

It should also be noted that whilst the £150 exemption is mirrored for Class 1 NIC purposes, (so that if the limit is not exceeded, no liability arises for the employees), Class 1B NICs at the current rate of 13.8%, will be payable by the employer on benefits-in-kind which are subject to a PSA.

The full cost of staff parties and/or events will be disallowed for tax if it is found that the entertainment of staff is in fact incidental to that of entertaining customers.

VAT-registered businesses can claim back input VAT on the costs, but this may be restricted where this includes entertaining customers.

To find out more please follow us on Facebook , Twitter or Linkedin. Feel free to contact us on 0333 006 4847 or request a call back by texting to 075 6464 7474

PAYE settlement agreements

A PAYE Settlement Agreement (PSA) enables the employer to pay the tax and National Insurance instead of the employee on those benefits and expenses included within the PSA. This can be useful to preserve the beneficial nature of the benefit, for example in respect of a Christmas or other function falling outside the associated exemption, or where the effort involved in reporting the benefit on individual employees’ P11Ds is disproportionate to the amount involved.

What can a PSA be used for?

A PSA cannot be used for all benefits – only for those which fall into one of the following three categories:

  • minor benefits and expenses – such as telephone bills, incentive awards outside the scope of the exemption and similar
  • irregular items – such a relocation expenses or the occasional use of a company flat
  • impracticable expenses and benefits in respect of which it is difficult to place a value on or to divide up between individual employees – such as staff entertainment or shared cars

A PSA cannot be used for cash payments or for high-value items such as company cars.

Items falling within the scope of the trivial benefits exemption can simply be ignored for tax and National Insurance purposes – they should not need to be included in a PSA.

Setting up and checking a PSA

To set up a new PSA, the employer should write to HMRC setting out the benefits and expenses to be included within the PSA. Once HMRC have agreed the PSA, they will send two draft copies of form P626. Both copies should be signed and returned to HMRC. HMRC will authorise the PSA and send a form back – this will form the PSA.

A new PSA must be agreed by 6 July following the end of the tax year for which it is to have effect.

A PSA is an enduring agreement. Once it has been set up it remains in place until revoked by either the employer or HMRC. Employers should check that an existing PSAs remain valid.

Impact of a PSA

Where a PSA is in place, the employee does not pay tax on any benefits included within the PSA – instead the employer meets the liability on the employee’s behalf. Also, there is no need to report benefits included in the PSA on the employee’s P11D, or to payroll them.

Instead the employer pays tax on the items included within the PSA grossed up at the employees’ marginal rates of tax. For Scottish taxpayers, the relevant Scottish rate of income tax should be used in the calculation.

As far as National Insurance is concerned, Class 1B contributions, which are employer-only contributions are payable at a rate of 13.8% in place of the Class 1 or Class 1A liability that would otherwise arise. Class 1B contributions are also due on the tax paid under the PSA (as the tax paid on behalf of employees is also a taxable benefit).

Settling the PSA

Form PSA1 should be used to calculate the amount of tax and Class 1B National Insurance due under the PSA. This should be sent to HMRC after the end of the tax year. The tax and Class 1B National Insurance must be paid by 22 October after the end of the tax year where payment is made electronically or by the earlier date of 19 October where payment is made by cheque.

Partner note: ITEPA 2003, s. 703 — 707;Income Tax (Pay As You Earn) Regulations 2003 (SI 2003/2682), regs. 105 – 117; Statement of Practice SP5/96.

Voluntary National Insurance contributions – should you pay?

The payment of National Insurance contributions provides the mechanism by which an individual builds up their entitlement to the state pension and certain contributory benefits. Different classes of contribution provide different benefit entitlements.

Employed earners pay Class 1 contributions where their earnings exceed the lower earnings limit – set at £118 per week (£512 per month, £6,136 per year) for 2019/20. Self-employed earners pay Class 2 and Class 4 contributions, but it is the payment of Class 2 contributions only which provide pension and benefit entitlement. A self-employed earner is liable to pay Class 2 contributions where their earnings from self-employment exceed the small profits threshold, set at £6,365 for 2019/20. Where profits from self-employment are below the small profits threshold, the self-employed earner is not liable to pay Class 2 contributions but is entitled to do so voluntarily. For 2019/20, Class 2 contributions are payable at the rate of £3 per week.

Qualifying year

A year is a qualifying year is contributions have been paid for all 52 weeks of that year. If there are some weeks for which contributions have not been paid, the year is not a qualifying year. However, contributions can be paid voluntarily to make up the shortfall and turn a non-qualifying year into a qualifying year.

How many qualifying years are needed?

An individual needs 35 qualifying years to receive the full single-tier state pension payable to those reaching state pension age on or after 6 April 2016. To receive a reduced single tier state pension, at least 10 qualifying years are needed.

Should voluntary contributions be paid?

Voluntary contributions may be paid to make up the shortfall for a year where Class 1 or Class 2 contributions were not paid for the full 52 weeks or for a year for which there was no liability to either Class 1 or Class 2.

Before paying voluntary contributions, it is necessary to ascertain whether the payment of such contributions would be worthwhile. The starting point is to check your state pension. This can be done online at www.gov.uk/check-state-pension.

If you already have 35 qualifying years (or will do by the time state pension age is reached), there is no benefit in paying voluntary contributions. However, if you have less than 35 years, it may be worthwhile to increase your state pension. Likewise, if by state pension age you will have some qualifying years but less than 10, it may be worthwhile paying sufficient voluntary contributions to secure a minimum pension.

Class 3 contributions

Class 3 contributions are voluntary contributions and can be paid to boost the state pension.

For 2019/20, Class 3 contributions cost £15 per week. Thus, at these rates, to increase the state pension by 1/35th by paying voluntary Class 3 contributions for a year will cost £780. For 2019/20, the single-tier state pension is £168.60 per week, so at 2019/20 rates, each extra qualifying year (up to 35) is worth £4.82 per week.

Class 3 contributions must normally be paid within six years from the end of the tax year to which they relate – although extended time limits in certain cases.

Voluntary Class 2

Where a person is entitled but not liable to pay Class 2 contributions, paying Class 2 contributions voluntary is a cheaper option, at £3 per week for 2019/20 rather than £15 per week.

To find out more please follow us on Facebook , Twitter or Linkedin. Feel free to contact us on 0333 006 4847 or request a call back by texting to 075 6464 7474

Reporting expenses and benefits for 2018/19

Where employees were provided with taxable benefits and expenses in 2018/19, these must be notified to HMRC.

The reporting requirements depend on whether the benefits were payrolled or not.

Benefits not payrolled

Taxable benefits that were not payrolled in 2018/19 must be reported to HMRC on form P11D. There is no need to include benefits covered by an exemption (although take care where provision is made via an optional remuneration arrangement (OpRA)) or those included within a PAYE Settlement Agreement. Paid and reimbursed expenses can be ignored to the extent that they would be deductible if the employee met cost, as these fall within the statutory exemption for paid and reimbursed expenses.

The value that must be reported on the P11D depends on whether the benefit is provided via an OpRA, such as a salary sacrifice scheme. Where the benefit is provided other than via an OpRA, the taxable amount is the cash equivalent value. Where specific rules apply to determine the cash equivalent value for a particular benefit, such as those applying to company cars, employment-related loans, living accommodation, etc., those rules should be used. Where there is no specific rule, the general rule – cost to the employer less any amount made good by the employee – applies.

Where provision is made via an OpRA, and the benefit is not one to which the alternative valuation rules do not apply, namely:

  • payments into pension schemes
  • employer provided pension advice
  • childcare vouchers, workplace nurseries and directly contracted employer-provided childcare
  • bicycles and cycling safety equipment, including cycle to work schemes
  • low emission cars (Co2 emissions 75g/km or less)

the taxable amount is the relevant amount. This is the higher of the cash equivalent under the usual rules and the salary foregone or cash alternative offered. The taxable amount is the cash equivalent value where the benefit falls outside the alternative valuation rules.

Payrolled benefits

Payrolled benefits should not be included on the P11D but must be taken into account in calculating the Class 1A National Insurance liability on form P11D(b).

P11D(b)

Form P11D(b) must be filed regardless of whether benefits are payrolled or notified to HMRC on form P11D. The P11D(b) is the Class 1A return, as well as the employer’s declaration that all required P11Ds have been submitted.

Paper or online

There are various ways in which forms P11D and P11D(b) can be filed. The simplest is to use HMRC’s online end of year expenses and benefits service or HMRC’s PAYE Online for employers service. Forms can also be filed using commercial software packages.

There is no requirement to file P11Ds and P11D(b)s online – paper forms can be filed if preferred.

Deadline

Regardless of the submission methods, forms P11D and P11D(b) for 2018/19 must reach HMRC by 6 July 2019. Employees must be given a copy of their P11D (or details of the information contained therein) by the same date. Details of payrolled benefits must be notified to employees by the earlier date of 31 May 2019.

Class 1A National Insurance must be paid by 22 July where paid electronically, or by 19 July where payment is made by cheque.

To find out more please follow us on Facebook , Twitter or Linkedin. Feel free to contact us on 0333 006 4847 or request a call back by texting to 075 6464 7474