Reporting expenses and benefits

Most employers operate PAYE as part of their payroll to collect income tax and national insurance from employment. They can also register to collect tax on employee expenses and benefits through payroll during the tax year. This is known as payrolling.

Those who’ve registered for payrolling before the 2016/17 tax year do not need to report any benefits that have already been taxed through the payroll system. 

Expenses and benefits not payrolled will need to be reported to HMRC by 6 July 2017.

This article will explain the key steps to completing and submitting your records on time.

How it works

Employee expenses and benefits must be reported on specific forms which are on the HMRC website. 

There are 2 forms to complete: P11D and P11D(b)

Forms 

You need to fill out a P11D form to report any end-of-year expenses or benefits you have given to your employees or directors within your business that have not been taxed through payroll.

Form P11D(b) is used to report the amount of class 1A national insurance contributions due on expenses.

Completing details

HMRC asks employers to use the following format when completing form P11D:

  • use Arial font size 11 (when printed)
  • sort by employee, not benefit type
  • include your employer reference
  • include employee’s name and national insurance number
  • put an employee’s expenses and benefits on the same line
  • include P11D letter codes next to each benefit.

Payrolled benefits

You need to inform your employees of what expenses or benefits you have deducted through payroll. 

Employers must tell staff about the following before 1 June after the end of each tax year:

  • details of the benefits payrolled
  • cash equivalent of each benefit payrolled
  • details of benefits not payrolled.

This information can be included on an employee's payslip or in a separate statement.

You will need to let new employees who will have benefits that will be payrolled that:

  • their tax code might be changed to take any benefits from previous employers
  • the new benefit won’t be included in their tax code
  • any underpaid tax paid through their existing tax code will still be collected.

Talk to us today about your reporting obligations.