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P11D: Focus On Staff Entertaining

Are you reporting it correctly?

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POSTED BY HELEN BEAUMONT ON 12/06/2019 @ 8:00AM

Accountants are noticing an increasing number of enquiries from HMRC about the amounts spent on entertaining staff ...

Ensure you file your employee's P11Ds correctly or you could get the unwanted attention of HMRC!

Ensure you file your employee's P11Ds correctly or you could get the unwanted attention of HMRC!

copyright: stevanovicigor / 123rf

As we approach the P11D filing deadline, I thought I could remind you about the tax rules about what can be claimed in regard to staff entertainment. The deadline is 5th July 2019 and HMRC are clamping down on spurious claims and have been sending letters out to employers whom they deem have claimed for excluded items before.

These include:

  • Staff entertainment costs shown in the company's own accounts

  • No PAYE Settlement Agreement (PSA) in place.

  • Staff entertaining hasn't been reported on previous P11Ds

Remember, staff entertaining provided to employees is mostly seen by HMRC as a taxable benefit. This will include staff events, parties and other social functions. An employer can include it on their PSA so they settle any tax and Class 1B National Insurance on behalf on their employees, or it should be reported on the employee's actual P11D with the company settling up the Class 1A.

Staff entertainment can be tax exempt where certain conditions are met. This includes costing less than £150 per head (in a single tax year), is annual in nature and is open to all employees.

The type of entertainment can offer up a number of complexities with the exemption though. Calculating the cost per head when spouses and partners are included, travelling and accommodation costs and the locations of multiple parties for different parts of a larger business all make the calculation more complex and prone to mistakes.

If staff entertainment isn't covered by the annual events exemption, you must seriously consider if it complies with rules on trivial benefits for employees. These can be offered when:

  • the cost of providing the benefit is £50 or less

  • the benefit is not cash or a cash voucher

  • there is no contractual entitlement and it is not under a salary sacrifice arrangement

  • not provided in recognition, or in anticipation of, particular services performed by the employee as part of their employment

In limited companies with five or fewer employees (including the directors) and the benefit is provided to a director or other office holder, the exemption is capped at £300 per tax year.

If you haven't reported staff entertaining in previous years correctly, HMRC can recover any tax and NIC contributions due for up to four past years for tax and six years for National Insurance. You could also receive penalties and interest charges as well!

"Would you like to know more?"

If you'd like to find out more about staff entertaining, the P11D and how to report expenses properly then do give me a call on 01908 774323 or click here to ping me an email and let's see how I can help you.

Until next time ...

HELEN BEAUMONT


PS:

If you're looking to work with an expert tax advisor with a wide range of tax experience, do visit www.essendontax.co.uk to find out more about me and discover how I can help!


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More about Helen Beaumont ...

Helen brings the personal tax planning experience of the top 20 tax companies to Essendon. Formerly of MacIntyre Hudson (with 45 offices nationwide), Helen worked at Chancery for more than 10 years before joining Essendon as the personal tax specialist.

Tax Planning can make a considerable difference to your tax liability. Helen’s specialist knowledge in tax planning and experience ensures every opportunity to minimise your tax bill is utilised. By analysing your investments, income, profit and expenditures, Helen will provide strategic tax planning expertise that could offer significant savings, whilst delivering clear, honest advice and guidance.

When Helen is not at Essendon she spends time with her young son and likes going on long walks with the family dog.