Expenses and benefits for employers

Overview

If you’re an employer and provide expenses or benefits to employees or directors, you might need to tell HM Revenue and Customs (HMRC) and pay tax and National Insurance on them.

Examples of expenses and benefits include:

• company cars
• health insurance
• travel and entertainment expenses
• childcare

Reporting and paying

At the end of the tax year you’ll need to submit an end-of-year form to HM Revenue and Customs (HMRC) for each employee you’ve provided with expenses or benefits.

The form will either be a P9D or a P11D, depending on how much the employee earns.

You may need to submit form P11D(b) to report the amount of Class 1A National Insurance due on all the expenses and benefits you’ve provided. You should do this if:

• you’ve submitted any P11D forms
• you’ve been sent a P11D(b) form by HMRC

If you don’t submit any P11D forms, you can tell HMRC that you don’t owe Class 1A National Insurance by completing a declaration.

What to report

Each expense or benefit is calculated differently. Find the type of expense or benefit you’ve provided to see what you’ll need to report and pay.

How to report

You can use any of the following methods:

• commercial payroll software
• HMRC’s PAYE Online service
• HMRC’s Online End of Year Expenses and Benefits service

You can also download and fill in forms P11D, P9D and P11D(b) and send them to your HMRC office.

Correcting errors on forms

Use HMRC’s P9D or P11D forms to correct an error for an expense or benefit reported in any tax year.

Put all the benefits and expenses for the tax year on the form, not just the benefits you want to correct.

You must submit a paper form, even if you originally submitted online.

The forms will show the most recent tax year. Write a different tax year on the form if you need to report for a different year. You must write:

• that you’re using the form to correct an error made in a different year to the one printed on the form
• the tax year you’re making the amendment for

Send the form to:

Penalties

You may be charged a penalty if you carelessly or deliberately give inaccurate information in your tax return that results in you:

• not paying enough tax
• over-claiming tax reliefs

Deadlines

What you need to do	Deadline
Submit your end-of-year forms (P9D and P11D) online to HMRC	6 July following the end of the tax year
Give your employees a copy of the information on your forms	6 July
Tell HMRC the total amount of Class 1A National Insurance you owe on form P11D(b)	6 July
Pay any Class 1A National Insurance owed on expenses or benefits	Must reach HMRC by 22 July (19 July if you pay by cheque)
If you have a PAYE Settlement Agreement pay tax and Class 1B National Insurance	Must reach HMRC by 22 October (19 October if you pay by cheque)
Pay any PAYE tax or Class 1 National Insurance owed on expenses or benefits	Pay monthly through payroll

Record keeping

You must keep a record of all expenses and benefits you provide to your employees.

Your records need to show that you’ve reported accurately and your end-of-year forms are correct.

What you should keep

You’ll need to keep a record of:

• the date and details of every expense or benefit you provide
• any information needed to work out the amounts you put on your end-of-year forms
• any payment your employee contributes to an expense or benefit

You should also keep any correspondence you have with HMRC.

Calculate earnings 'at a rate'

When reporting expenses and benefits, you need to work out your employee’s earnings ‘at a rate’. This affects which end-of-year form you submit.

To work out earnings at a rate:

1. Take your employee’s earnings during the year.

2. Add the value of any expenses or benefits you’ve given them during the year.

3. Work out the full-year equivalent if they didn’t work the full year.

For part-time employees, don’t gross up earnings to a full-time equivalent when calculating at a rate.

Dispensations

Some expenses and benefits are eligible for a dispensation, meaning you won’t have to report them to HM Revenue and Customs (HMRC).

Dispensations can cover routine business expenses and benefits like:

• travel
• phone bills
• business entertainment expenses
• company car fuel

Find the type of expense or benefit you’ve provided to see whether you can apply for a dispensation so you won’t have to report it.

Checking expenses

You can only apply for a dispensation if you have a system in place to check expense claims.

Your employees aren’t allowed to check their own expenses, so someone else within your company needs to do this to make sure that they are legitimate claims.

If this isn’t possible, you’ll need to prove that your claims are covered by the dispensation. In most cases receipts will be enough, but you may be asked for more evidence if your receipts don’t include enough information.