P11d dispensations – changes in 2016-17
Prior to 6th April 2016 a company had to produce a P11d for most directors (regardless of earnings) or employees earning more than £8,500 where they had been provided with a benefit in kind or, more importantly for a lot of smaller businesses, where the company had made expenses payments to, or on behalf of their director's or employees
In a lot of cases the expenses were incurred, wholly, exclusively and necessarily by the director or employee and ultimately no tax charge arose on the company or the individual concerned. If the company wanted to avoid the headache of reporting these reimbursed expenses on form P11D, then they could apply to HMRC for a dispensation from reporting.
However since 6th April 2016, as long as certain measures are in place, HMRC have abolished the requirement for reporting such reimbursed expenses on a P11d for any directors or employees. So in effect HMRC have introduced a form of 'Self-Assessment' for these expenses payments.
So what measures need to be put in place?
It will be necessary for the company to have a good procedure for documenting and approving any such reimbursed expenses. Additionally the company must ensure that any such expenses are wholly, exclusively and necessarily incurred on behalf of the company, which is preferably subject to a review proceedure.
So what does this mean for companies with only one director? Well, you can't really check your own expenses - but you can ensure that any expenses charged to your company are within HMRC's guidelines. Travel and subsistence tends to be an area that causes clients a bit of concern - so we actually give our clients a comprehensive guide to what they can and can't claim for travel. If your haven't been given guidance, you should ask for this now.
And you should have your expenses reviewed at year end to make sure that, year on year, they're consistent - or, if there are significant changes in the amounts each year, that it's clear why. That way you'll stay on the straight and narrow and won't get into hot water should HMRC start a random enquiry on the company's affairs
If you'd like any further information as to whether trading through a limited company is right for you or what expenses you should be claiming, feel free to get in touch.