If your business employs staff, and gives those staff any non-cash benefits or any money other than salaries or dividends, then you’ll be aware of forms P11D.
These forms give HMRC information about certain benefits that your business has given its employees during the course of a tax year.
Up until 5th April 2016, employers also had to include the details of any business expenses that they had paid back to employees on forms P11D.
For example, if an employee personally paid for a train ticket to travel to a client meeting and the company repaid the employee for the ticket, that's a reimbursed expense that had to be reported on the employee's form P11D. The employee would also have had to include this, and other reimbursed expenses, on their Self Assessment tax return.
What has changed?
2015/16 was the final tax year in which reimbursed expenses had to be included on forms P11D.
For the 2016/17 tax year onwards, any reimbursed expenses that HMRC regards as business expenses, and which therefore attract no extra tax, do not have to be included on the P11Ds at all.
In addition, employees will not have to report reimbursed expenses on their tax returns for the 2016/17 tax year and beyond.
Which small business owners are affected?
This change will only affect you if you have to complete forms P11D (i.e. if you’re an employer and your business provides its employees with non-cash benefits). While you will no longer have to report reimbursed expenses, you will have to continue filing P11D forms to report the non-cash benefits that the business gives its employees.
Remember, if you're running a limited company, the company is an employer, and you are almost certainly an employee if you are drawing a salary from the company. This means that you may need to file forms P11D to report the non-cash benefits that you receive from the company, as well as those that your other employees (if you have any) receive.
If you are a sole trader, you are not an employee of the business but may have to file forms P11D on behalf of any people you do employ.
If you don’t employ staff (or if you do employee staff but don’t provide them with non-cash benefits), you won’t have to file forms P11D and won’t be affected by these changes.
As ever, if you are in any doubt what your obligations are, always check with your accountant.
A step towards simplification
I believe that this is a positive change, as it it both streamlines and simplifies the P11D reporting process for employers. It will also make Self Assessment a little easier for employees, as they will no longer need to report their reimbursable expenses on their tax returns.
Disclaimer: The content included in this blog post is based on our understanding of tax law at the time of publication. It may be subject to change and may not be applicable to your circumstances, so should not be relied upon. You are responsible for complying with tax law and should seek independent advice if you require further information about the content included in this blog post. If you don't have an accountant, take a look at our directory to find a FreeAgent Practice Partner based in your local area.