Reporting 2020/21 benefits in kind
Jun 09, 2021
P11D forms, which report benefits in kind provided to employees and directors during the 2020/21 tax year, need to be submitted to HMRC by 6 July 2021.
As the coronavirus pandemic has significantly affected our working arrangements this past year, this may have a knock on effect on any benefits in kind provided to employees.
Car benefits reduced if ‘unavailable’
If a company car has been ‘unavailable’ for private use for 30 or more consecutive days, the benefit is proportionately reduced.
During the various lockdown periods many employees and directors have not been using their company cars, and they may have been left sitting on their driveway. Unfortunately however, this does not count as being unavailable.
HMRC have confirmed that they would continue to regard the car as available to the employee unless the keys or fobs are returned to the employer, or to a third party such as the leasing or disposal company as instructed by the employer.
It’s worth noting though that if an employee has been provided with a motor car with zero CO2 emissions, there is no taxable benefit in kind for 2020/21. This charge will increase to 1% of the original list price for the 2021/22 tax year.
Reimburse private fuel to avoid fuel benefits
Another consequence of all the lockdown periods is that employees may have driven fewer private miles in their company cars, particularly if they haven’t been commuting to the office each day.
If they are to avoid being taxed on the provision of private fuel as a benefit in kind for the 2020/21 tax year, then they need to fully reimburse their employer for the cost of private fuel by 6 July 2021.
The fuel benefit in kind is calculated by multiplying the car’s CO2 emissions percentage by a notional list price of £24,500. For example, if a director drove a company car such as a Mercedes Benz E200 saloon this would have very high CO2 emissions of 169g per km. This emission level is calculated as an appropriate percentage based on HMRC’s ready reckoner. For 169g per km the appropriate percentage is 37% for 2020/21, which multiplied by the notional list price would equate to £9,065. If the director in question is a 40% higher rate taxpayer then this would result in a tax bill of £3,626. That would be an awful lot of private fuel!
In addition to the tax payable by the director on the provision of private fuel, there would also be £1,251 of Class 1A national insurance contributions payable by the employer.
Note that the private fuel benefit is an all or nothing benefit, and there must be full reimbursement by 6 July 2021 to eliminate the benefit. The simplest method would be to multiply private miles by the HMRC advisory fuel rate for the vehicle.
Not all benefits need to be reported on form P11D
Despite all of the coronavirus lockdowns, HMRC still expects P11D forms reporting expenses and benefits to be submitted by the normal 6 July deadline.
However, remember that reimbursed expenses no longer need to be reported where they are incurred ‘wholly, exclusively and necessarily in the performance of the employee’s duties’. Dispensations from reporting are no longer required, although HMRC would expect internal controls to be in place.
Remember too that trivial benefits of no more than £50 provided to employees don’t need be reported. This typically covers gifts to employees at Christmas and on their birthdays.
If you have any queries about your P11D form or taxable benefits in kind, please don’t hesitate to contact the Paish Tooth team.