The deadline for submitting and paying P11Ds and PAYE Settlement Agreements (PSAs) for the 2020/21 tax year is around the corner. With the deadlines fast approaching, we look at how COVID-19 will impact the reporting requirements for P11Ds and PSAs.
As a recap, P11Ds are prepared when employees are provided with taxable benefits throughout the tax year. Class 1A National Insurance Contributions (NIC) is payable by the employer at 13.8% of the benefit, while the employee will pay tax on the benefit in the future, once the P11Ds are submitted and HMRC have updated the employee’s tax code.
PSA’s allow employers to report and pay tax on benefits provided to employees, to ensure employees are not financially disadvantaged. Benefits to be included on a PSA must be minor, irregular or impracticable and if they qualify, don’t need to be reported on P11Ds. New categories for PSA’s should be agreed with HMRC, prior to an expense or benefit being provided.
Employers must settle the Class 1A NIC on the taxable benefits they give to employees. Employers can pay this online by bank transfer, direct debit, or with a credit card or corporate credit card. The liability can also be paid by cheque through the post or telephone banking. For the 2020/21 tax year this must be paid by 22 July 2021, if paying online or 19 July 2021, if paying by post.
Tax and Class 1B NIC relating to PSA’s is due for payment by 22 October 2021, if paying online or 19 October 2021, if paying by post.
Please see the following deadlines for your P11Ds for the 2020/21 tax year.
Please see the following timeline including deadlines for the 2020/21 tax year.
If you provided medical benefits, be aware the taxable value may have changed for 2020/21. Some medical providers have made refunds to employers where they have failed to provide services that were originally specified. Note that the reportable value of the benefit in kind (BIK) is the amount paid in the year, less any refund relating to that year, regardless of when it is received.
Ultra Low Emission Vehicles (ULEVs) are cars with approved CO2 emission figures of 1 to 50g/km. Along with the year of registration, the percentage BIK is now based on the ‘electric range’. This is the distance the car can travel on electric power before its batteries need recharging. This figure will now need to be reported on P11Ds. The specific percentages can be found here.
The Official Rate of Interest (ORI) decreased from 2.25% to 2.00% in the 2020/21 tax year. This rate is used to calculate the taxable benefit of taxable employer-provided accommodation and, on employer provided loans in excess of £10,000.
HMRC have announced that employer provided COVID-19 antigen tests and work-related PPE for employees are not taxable benefits, so do not have to be reported on P11Ds.
Many employees will have been given equipment to assist them when working from home due to the pandemic. Exemptions from work related benefits are only available where there is significant private use of an asset.
Normally any items that are purchased by employees for which the cost is reimbursed by their employer would be taxable. HMRC announced in May 2020 a temporary exemption from tax and NIC, covering any home office equipment purchased by employees and reimbursed by employers during the pandemic. To be eligible for the exemption, the equipment:
If an employer arranges for a broadband connection to be installed in an employee’s home because they now need to work from home following the pandemic, the costs are tax free and not reportable on P11Ds. The same applies to mobile phones provided in the case employees no longer have access to their work phones (limited to one per employee).
If a vehicle was not used privately during a period (e.g. during lockdown) in the tax year, there may be an opportunity to reduce the benefit in kind charge. A car or van benefit is not charged for periods of unavailability to the employee for private use. As long as the period lasts for 30 or more consecutive days, the car benefit is reduced in proportion to the number of days when the car is unavailable. However to prove that the vehicle was not available for private use, HMRC would want assurance that an employee had no way of driving the vehicle during the period. This may have been for example because they handed their keys back to their employer. Otherwise, regardless of whether the car is actually being used, it is considered to be available for private use, hence taxable and reportable on the employee’s form P11D.
Normally, if you want to add additional categories to a PSA, HMRC will issue you a new P626. For 2020/21, if new items relate exclusively to COVID-19, a new P626 is not required. To add COVID-19 related items, for example ordinary commuting costs, email HMRC at [email protected].
If you would like assistance in checking your P11D and PSA forms before submission to HMRC, Crowe can assist. Please get in touch with your usual Crowe contact.