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The last working day to submit P11Ds is Friday 4 July, although the official deadline is Sunday 6 July. KPMG says that indications are that HMRC more likely to impose penalties than in previous years.

Whilst filing file P11D forms any later than 4 July this year will result in employers receiving a £100 penalty from Her Majesty’s Revenue and Customs (HMRC), KPMG warns that a mistake on a P11D form could cost them 30 times as much.

Increased risk profile 

The maximum penalty HMRC can impose for an incorrect P11D form is £3,000, but the pain for the employer does not end here.

A penalty can also lead to an increased “risk profile” with HMRC, potentially affecting the way in which HMRC deals with the firm concerned in the future.

John Chaplin, employment tax director at KPMG in the UK, says that HMRC have historically not levied the fines and penalties available to them other than in exceptional circumstances.

He suspects, however, that this may well change this year as under a new ‘risk-based’ approach.

“We are seeing tax inspectors taking a much more adversarial stance and showing a greater appetite for imposing stricter penalties. As the fine is per incorrect form submitted, the penalties can soon add up,” Chaplin notes.

He says that employers could potentially find themselves being fined over and over again for the same mistake if they have made it repeatedly on a number of employees’ P11Ds.

Most common errors 

The deadline for submitting P11Ds is always 6 July, however, as that falls on a Sunday this year, the effective deadline is Friday 4 July.

Whilst it is important that the returns are submitted on time, it is arguably even more important that they are correct.

In order to help companies get their P11D returns right, KPMG has compiled a list of the most common errors leading to P11Ds being incorrectly filled out.

Benefits and expenses payments 

Forms completed which are not in line with an agreed HMRC P11D Dispensation Notice, for example entertaining, travel and subsistence, could incur HMRC’s wrath.

You are required to declare all benefits and expenses payments not covered by a P11D Dispensation Agreement for appropriate employees.

“Ensure your agreements are up to date and replicate expense policies – we recommend these are revisited every 3 years,” Chaplin says.

In cases where agreements are not up to date, HMRC can back-date the revocation of the dispensation rendering P11Ds incorrect.

Company cars

Incorrect list and accessory prices for company cars can lead to under/overpayments of tax and Class 1A National Insurance Contributions.

The list price is the inclusive price published by the manufacturer and includes all standard accessories, relevant taxes, delivery, etc.

It is not the dealer's advertised price or price paid for the car which could include discounts and cashbacks.

Later accessories added to company cars which exceed £100 should be included on forms P11D. These could include alloy wheels and, in some cases, satellite navigation systems.

CO2 emissions data not taken from the V5 registration document for company car/fuel scale benefits could trigger an error fine.

Cars first registered in the UK from 1 March 2001 - most company cars fall into this category - will have an approved CO2 emissions figure on the Vehicle Registration Document (V5).

This figure will form the basis of calculating both car and fuel benefits. Unless the dispensation specifically mentions staff entertaining, these costs should be reported.

Client entertaining 

Many employers submit incorrect P11Ds which either don’t report staff entertaining or incorrectly show that client entertaining has been disallowed in the employer’s accounts - by putting a cross in section N.

This can lead to a full HMRC enquiry into entertaining expenses including the corporate tax and VAT treatment.

Where vans are taken off your premises overnight by your employees a van scale charge may be imposed of £3,000 regardless of the van’s age as HMRC will assume that the vehicle is being taken away for private use.

The only way to eliminate this charge is to completely satisfy some quite onerous requirements to prove that there is no private use.

If you have vans, it is worthwhile reviewing the terms of their usage annually before submitting P11Ds.

Mileage payments reimbursed to employees using their own cars in excess of HMRC's Approved Mileage Allowance Payments (AMAP) rates - currently 40p for the first 10,000 miles and 25p thereafter - are fully reportable on forms P11D.

Errors often occur where business mileage in an employee’s own car is over 10,000 miles in the tax year.

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