P11D’s are the forms that you are required to complete each tax year and file with HMRC to record benefits and expenses paid to employees.
A P11D dispensation (form P11Dx) allows employers to agree with HMRC in advance that certain benefits provided to employees are not required to be reported on form P11D and any associated tax/NI is not due.
Strictly, in the absence of a dispensation all benefits should be listed on a P11D unless they feature on a very narrow list of outright exemptions.
Business mileage is a common example which explains the point well. It is commonly known that employers can pay 45p per mile (for first 10,000 miles and 25p per mile thereafter) to employees who use their own vehicle for business purposes.
Even though these rates are known and agreed with HMRC, strictly, they should be reported as a P11D benefit with a corresponding business expense claim made. This allows for the situation where employees have mixed personal and business miles so all mileage is reported as a benefit and a deduction taken for the business element even if the resulting benefit is nil.
However, having a dispensation in place (one document for all of your employees) stating that you have a policy and that only business miles are compensated allows you to escape the requirement to report this.
This is especially useful if this is an employee’s only benefit. It saves all the admin/cost of P11Ds where they are not necessary. All that is needed is one form.
P11D dispensations can be used for a range of other business expenses including travelling expenses other than mileage, entertaining and telephone bills.
Yes, paperwork is a pain but having a dispensation in place and ensuring it is regularly updated could make life much easier. A dispensation agreed with HMRC within the tax year can usually be backdated to the start of the tax year. So, why not make it one of your first tasks for 2015?
If you need any assistance please do not hesitate to contact Lesley Sutton on 01484 550 037 or email firstname.lastname@example.org.