May 2017 Newsletter9th May 2017
Our newsletter this month includes: a reminder for employers to make appropriate returns of benefits to HMRC, the tax and NIC implications of making loans to employees, and expenses paid to employees for the business use of their own transport.
Expenses and benefits for employees
Until 2015-16, it was possible to apply for a dispensation to exclude certain expenses and benefits provided to employees from the year end returns to HMRC: primarily the submission of forms P11D. These dispensations ceased to be effective from 6 April 2016. From this date many of the expenses covered by dispensations were exempted from the benefits legislation. The sorts of expenses covered include:
business phone bills
business entertainment expenses
uniform and tools for work
To qualify for an exemption, employers must either be:
paying a flat rate to your employee as part of their earnings this must be either a benchmark rate or a special (‘bespoke’) rate approved by HMRC, or
paying back the employee’s actual costs
Employers do not have to formally apply for exemption if they reimburse using HMRC’s benchmark rates for allowable expenses. You only need apply if you want to use your own rates as these rates will need to be agreed with HMRC. There must be systems in place to check the payments are as agreed with HMRC.
The filing deadlines for P11D forms and associated returns are:
6 July 2017 – file forms P11D
6 July 2017 – give employees a copy of their P11D
6 July 2017 – submit return of Class 1A NIC due on form P11D(b)
On or before 22 July 2017 (19 July 2017 if paying by cheque) – pay any Class 1A NICs due
There is a fixed penalty of £100 per 50 employees for each month or part of a month the P11D(b) return is late. There are also penalties and interest if your payments of Class 1A NICs are paid late.
Don’t forget that the earnings rate of £8,500 pa for a P11D to be required was abandoned from 6 April 2016 so that employees who previously needed a form PD9 will now need a P11D.
Beneficial loans to employees
In many cases, making loans to your employees or their relatives can create an obligation to report a beneficial loan to HMRC. The deemed benefit would be a taxable benefit in kind for the relevant employee, and would increase the employer’s Class 1A NIC bill at the end of the tax year.
However, certain loans are exempt from this reporting obligation. These may include loans employers provide:
in the normal course of a domestic or family relationship as an individual (not as a company you control, even if you are the sole owner and employee),
with a combined outstanding value to an employee of less than £10,000 throughout the whole tax year,
to an employee for a fixed and never changing period, and at a fixed and constant rate that was equal to or higher than HMRC’s official interest rate when the loan was taken out – the official rate for 2016-17 was 3%,
under identical terms and conditions to the general public as well (this mostly applies to commercial lenders),
that are ‘qualifying loans’, meaning all of the interest qualifies for tax relief,
using a director’s loan account as long as it’s not overdrawn at any time during the tax year.
Loans written off also create a National Insurance Class 1 charge. They must be reported on a P11D and the employer has an obligation to deduct and pay Class 1 NIC on the deemed value of the benefit.
Calculating the taxable benefits for chargeable loans can be somewhat complex and readers are advised to take advice if they are unsure of their tax and NIC responsibilities.
What are approved mileage payments?
Mileage Allowance Payments (MAPs) are the rates used by employers to reimburse employees when they use their own transport for business purposes. The current rates are well-known. They are:
Cars and vans – 45p per mile for the first 10,000 miles and 25p thereafter.
Motorcycles – 24p per mile
Bikes – 20p per mile
As long as employers pay at these rates, and no more, any expenses paid are tax free in the hands of the employee.
If the employer is registered for VAT, they can also claim back as input tax the deemed VAT included in the mileage rate. To do this, employers should use the advisory fuel rates. These are published on the gov.uk website at https://www.gov.uk/government/publications/advisory-fuel-rates/advisory-fuel-rates-from-1-march-2016
If employers pay at rates higher than MAPs, any excess will be treated as remuneration, added to employees’ salary, and taxed accordingly.
If employers pay their employees at less than the MAP rates, employees can make a claim to HMRC to compensate them for any shortfall. In effect, the difference in the MAP rate paid times the business mileage for the tax year can be claimed as an allowable expense.
Tax Diary May/June 2017
1 May 2017 – Due date for Corporation Tax due for the year ended 31 July 2016.
19 May 2017 – PAYE and NIC deductions due for month ended 5 May 2017. (If you pay your tax electronically the due date is 22 May 2017)
19 May 2017 – Filing deadline for the CIS300 monthly return for the month ended 5 May 2017.
19 May 2017 – CIS tax deducted for the month ended 5 May 2017 is payable by today.
31 May 2017 – Ensure all employees have been given their P60s for the 2016-17 tax year.
1 June 2017 – Due date for Corporation Tax due for the year ended 31 August 2016.
19 June 2017 – PAYE and NIC deductions due for month ended 5 June 2017. (If you pay your tax electronically the due date is 22 June 2017)
19 June 2017 – Filing deadline for the CIS300 monthly return for the month ended 5 June 2017.
19 June 2017 – CIS tax deducted for the month ended 5 June 2017 is payable by today.
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