Easy Does It

P11D Software
July is the month by which employers must file expenses and benefits returns for their employees and pay over the Class 1A NICs that are due on most of the benefits. For many employers, and for the accountants that prepare the returns for their clients, this is a time-consuming and often frustrating annual exercise. Unlike the P14 and P35 payroll returns, which should be exact to the penny, completion of P11D, P9D and P11D(b) returns is not an exact science, often depending on incomplete records, limited time and resources, and an inadequate understanding of the complex legislation. The penalties for getting it wrong are considerable.

Support in this worrying area of tax compliance is available in the form of computerised P11D systems, some standalone, others integrated with payroll systems. As well as automating many aspects of the process, including electronic filing, many systems help employers with the problem of compliance by providing extensive contextual guidance on what must be reported, and on what may be ignored as a result of dispensations, PAYE Settlement Agreements, extra-statutory concessions, and statutory exceptions.

How do you choose a suitable system? The first step is to see if your payroll system developer already provides a P11D module. Integration with payroll means that there is no need to create separate employee records, data does not have to passed back and forth, and the necessary earnings and salary information is available to determine automatically whether a P11D or a P9D is needed for each employee.

If your payroll supplier cannot help you - and P11D reporting is not a requirement of the Revenue's Payroll Standard - there are a number of commercially available standalone systems that are designed to manage the statutory benefits and expenses reporting requirements. Fifteen suppliers of such systems are listed in the accompanying table, along with the first year prices for their systems. Most suppliers charge according to the number of P11Ds that their systems are used to produce, but some now have a fixed price without any limit on the number of forms.

The functionality offered by each system varies as widely as the prices. At one extreme there are systems that have been around for many years, such as those offered by Puma and Premier Systems Technology, which started life as administration systems for car fleets, mileage expenses and car loans. With the advent of Self Assessment, they were developed further to include the other items that must be reported. As a result, they are not just P11D systems and will appeal to companies looking for a system to manage their cars, mileage allowances and loans.

At the other extreme are systems, such as the new and inexpensive product from Equa Via Software and the flexible product from Tyrer Moon, that are designed specifically to automate the production of the forms. They generally share a wide range of standard features, including:

• maintainable throughout the year, or just at the year-end
• comprehensive help facilities to guide employers through the statutory complexities
• well-developed import and export facilities, recognising that P11Ds may depend on the collation of information from many different departments in a company
• production of printed copies of P11Ds for the tax office and copies for employees, the P11D(b) return, P46(Car) forms, and some also produce P9Ds
• roll forward of the employee records for the last tax year to the next.

In addition to printed copies of forms, most are also able to output a file to the Revenue's magnetic media specification. Some are currently working on web-enabled versions of their systems, so that employees can be sent their copy of the P11D as an attachment to an e-mail, or gain access to it through the company intranet. A few are starting to look at replacing magnetic media filing with Internet filing or Electronic Data Interchange but there are lots of mutterings about the Revenue's specifications being too restrictive.

The P11D systems picture would not be complete without mentioning the Revenue's own submission facilities. These are best suited to small employers but, after registering with the Government Gateway, a wide variety of forms, including P11D, P9D, P11D(b) and P46(Car), can be completed on-line and submitted electronically over the Internet. (Information at www.inlandrevenue.gov.uk/efiling/help/mainhelp.htm )

Don't forget the P9D!
Employees who are not directors and who earn at a rate of less that £8,500, including all expenses payments (deductible or otherwise) and the cash equivalent value of all benefits, do not have to pay tax on benefits such as cars and car fuel, vans, loans, private medical insurance, services supplied, and assets placed at their disposal. To avoid an unnecessary tax charge for the employee, and an unnecessary Class 1A NICs charge for the employer, form P9D is completed for such employees instead of form P11D.

Some P11D systems do not produce P9Ds. Why not? A common explanation is that "our clients have never asked for them". However, the P9D is as much a statutory form as the P11D and if would be improper to overtax an employee by filing a P11D instead of a P9D. Payroll system developers are expected to satisfy statutory PAYE and NICs requirements in full, not leave something out because it affects relatively few employees. Shouldn't developers of P11D software also ensure that their clients have the means to comply fully with tax law governing expenses and benefits?

Employers do not need to think about P9Ds if they do not have any employees with P60 earnings of less than £8,500. However, employers with part-time and younger employees should ensure that their P11D system identifies those for whom a P11D would not be appropriate. Identifying such P9D employees requires access to their P60 earnings for the year and, in the case of part-timers and mid-year leavers, their annual salaries. P11D systems that are fully-integrated with a payroll system have a particular advantage in this regard.

The Revenue's detailed guidance for identifying employees who earn at a rate of less than £8,500 may be found at www.inlandrevenue.gov.uk/manuals/senew/SE20001.htm .