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Is a P11D needed for 2015/16?

Author: Mark Thomas
Date: 18th July 2016
Tags: P11D

If an employee puts in an expenses claim for the last three months, and most of it relates to 2015/16, but he was reimbursed in 2016/17, what should your bookkeeper enter, if anything, on the P11D for 2015/16?

From the previous article, you know that since 6 April 2016 certain job-related expenses are exempt from tax and NI. The exemption will most often apply to business travel, subsistence, entertainment and subscriptions, but isn’t limited to these.

Many employers will face the situation described above when preparing P11Ds for 2015/16. Why does it matter? The answer is that, apart from wanting to get it right, there’s potential for tax to inadvertently be avoided.

Under the rules which applied up to 5 April 2016 employees (including directors) are taxable on expenses reimbursed to them, but can make a claim for a tax deduction for costs incurred in the course of doing their job. Under the new rules expenses reimbursed since 6 April 2016 are exempt. That might mean an employee is entitled to a tax deduction under the old rules for expenses that are exempt under the new rules.

We recommend that, if you have reported expenses claimed by employees on Forms P11Ds for the year to which they relate, rather than the year in which you reimbursed them, continue with that practice. This will ensure there’s no accidental tax avoidance.

If you’ve stuck to the rules and reported expenses in the year that you reimbursed them then take one of two steps: when you pass the P11D details to the employee to report on their 2015/16 tax return, attach a note identifying the amount of expenses they should not claim on their tax return because they’ve been exempted under the new rules; or tell the employee to claim a tax deduction for the expense on their 2015/16 tax return, but be aware that there will be a corresponding tax charge for 2016/17 when you report the expense on the P11D for that year.

If you are in any doubt about your position in relation to this issue, please talk to your usual Thomas Croft contact as soon as possible.

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