P11P Processing Update From HMRC

HMRC has looked at the P11D data held for the 2009-10 tax year and can now share with CIPP members the main issues experienced during processing.

The top two errors are recording information on P11Ds for car and car fuel benefit details, meaning incorrect tax codes for some employees. These were:

• Fuel benefit not included – employers must include the details where this applies and significant numbers of P11Ds were submitted without this information. Amended P11Ds are required to correct the employee’s tax code.
• Incorrect completion of “from and to” dates – some employers completed the boxes for “dates car available” giving the period dates, e.g. 6/4/2009 to 5/4/2010. If the car was available in the previous tax year then the “from” box should not be completed. This also applies if the car will be available in the next tax year – the “to” box should remain open so that the tax code is carried into the next tax year (2010-11 in this example).

A number of employers now tax their employee benefits via payroll services and whilst this is fine, it can cause problems for both you and HMRC if you have not made this clear before submitting information. P11Ds are required but you must inform HMRC before you payroll benefits and clearly mark any P11D submissions “PAYROLLED”. This will prevent processing the form to update the tax code and stops the employee from being taxed twice.

HMRC has also identified that some codes were wrongly operated on a Wk1/Mth1 basis. The reason for this was that, in some cases, National Insurance and PAYE Service (NPS) was not correctly picking up estimated salary details. As a result, when the new tax code was calculated it did not recognise that there had been a potential under-deduction of tax. HMRC’s analysis shows that this happened through a combination of errors; some employer based within the P11Ds submitted, and some processing issues as already described.

When an individual or the employer contacts HMRC, action is quickly taken to put things right. Anyone who still believes their tax code is incorrect because of P11D information should contact HMRC Tax Helpline on 0845 3000 627 or write to HMRC using the address shown on their coding notice.

In addition, HMRC has recently published a ‘What’s New’ message and associated web guidance, which can be viewed at HM Revenue & Customs: 2010-11 P11Ds - important information for employers who have payrolled expenses and benefits and April’s Employer Bulletin also contains an article about ‘Errors completing P11Ds may cause problems with employee tax codes.’

HMRC plans to process P11Ds as soon as possible after their receipt, meaning that new coding notices for 2011-12 will be issued for employees whose circumstances have changed and this is not already covered in their code. Processing P11Ds earlier should mean smaller in-year underpayments are created for employees.
HMRC also advises that the reporting of benefits in kind is not currently included within the scope of the Real Time Information (RTI) system, which HMRC will pilot from April 2012. Where an employer already has an agreement with their tax office around payrolling benefits RTI will require details of the amounts of benefits payrolled to be reported within the RTI submission. Nonetheless, employers reporting under RTI will still be required to submit forms P9D, P11D and P11D(b) at the end of the year for all of their employees whether or not any benefits were included in their payroll services.

If you need more help with your HMRC Legislation or any other Payroll Services you may need help with, get in touch with me on Twitter or visit my website www.citylightspps.com.

Citylights Professional Payroll Solutions Ltd
Scott Muller
Managing Director
Tel   0844 576 33 08
Fax   0844 556 12 72
Email: scott@citylightspps.com