Form P11D for 2004/05

There are two significant changes, and two minor changes, to form P11D for tax year 2004/05.

The first is a correction to section F, to enable any fuel benefit charge to be calculated separately for each car where two cars are provided during the year. The boxes for "date free fuel was withdrawn" and to tick if it was later reinstated are repeated for each car.

The second is the removal of section M, the box to indicate if any taxable share-related benefits have been provided. The provision of employment-related securities and securities options must be reported on form 42 for 2004/05. Sections N and O are, as a resulted, changed to M and N.

The erroneous reference to "30 days" in Section B for notional payments has been corrected to "90 days".

The on-form instructions in Section E for car and mileage payments have been changed to clarify that it is only payments "for business travel in the employee's own vehicle" that are reported.
Source: www.inlandrevenue.gov.uk/comp/notes-10-17-v1-1.pdf
...back to 19 March 2004

P14 and P35 amended returns

The following information relates to year-end returns filed at the end of the 2004/05 tax year. The facility to make electronic amendments to P14 and P35 returns is not available for the 2003/04 tax year.

In our news item of 12 December 2003, we reported the guidance given in the Notes for Software Developers (issue 10.16) about the manual or electronic submission of forms P14 and P35 that contain amendments to the employer's original submissions. Even if an employer is required to file forms P14 and P35 electronically, amended forms may be filed electronically or on paper.

We asked the Electronic Business Unit to clarify the instructions given, in particular to explain how a P35 should be completed to show amended values for a single employee. We have put together the following example to illustrate the procedure. It illustrates the entries that would be made where the amounts reported on the original forms have been overstated and it is necessary to report negative adjustments. However, the same procedure applies where additional amounts are being reported on the amendment forms.

It should be noted that, when completing the original forms P14 and P35 electronically, the system used will not allow negative amounts to be shown, other than in those boxes that could be negative, e.g. NICs in contracted-out employment and tax refunds. The minus sign ("-") character is not otherwise permitted. On paper P14s, negative amounts of NICs or tax are indicated by the letter "R" in the adjacent box, not a "-" sign. However, when completing an amendment P14 and P35, the "-" sign is permitted throughout.

Example
After completing and filing all P14s and the P35, an employer finds that an employee's total earnings and tax in the current employment have been overstated. The amounts overstated on the original P14 are £;1,000 pay, £;220 tax, £;67.90 employee NICs and £;128 employer NICs. The NICs table letter was A.

To correct the returns, the employer must not simply issue a corrected P14 and P35 to replace the original returns. The amended P14 and P35 must only show the amounts by which the original returns are being amended. In this case, negative amounts must be reported.

The amended P14 will show

• all of the employer and employee header details, as normal
• in the NICs section, the table letter is entered and, on that line,
  
  
  • "-195.90" in column 1d for the total employee's and employer's NICs, and
  • "-67.90" in column 1e for the employee's NICs.
    
    

• in the Pay and Income Tax section, on the "In this employment" line,
  
  
  • "-1000.00" for the pay, and
  • "-220.00" for the tax.
    
    

• in the Pay and Income Tax section, on the "Total for the year" line, the same pay and tax figures should be repeated if that line was completed on the original form.

The amended P35 will show, in Part 1 Summary of payments for the year,

• in the listing section (paper return only),
  
  
  • the employee's name,
  • "-195.90" in the NICs column, and
  • "-220.00" in the Income Tax column.
    
    

• in the reconciliation section,
  
  
  • "-195.90" in boxes 1 and 3
  • "-220.00" in boxes 4, 6 and 9
  • "-415.90" in boxes 10, 12 and 28
  • "0.00" in box 29
  • "-415.90" in box 30

Finally, all of the questions in the checklist in Part 2 must be answered, and the declaration in Part 4 must be signed and dated. These are mandatory sections on both original and amended returns.

Other possible situations
The example given above looks at how to amend a single P14. An employer may have a number of P14s to correct, requiring the combined figures to be shown on the amendment P35. It may also be necessary to amend the P35 by itself in a similar manner if the incorrect figures do not derive from the P14, e.g. deductions of tax made from subcontractors, or amounts of SMP, SPP or SAP recovered.

If an amendment P14 is submitted electronically, the employee should be given a P60 showing the same amended figures, but only if the employee was given the P60 copy of the original P14 return.

If a paper P14 is used to make the amendment, the two P14 copies and the P35 are sent to the employer's Inland Revenue office and the P60 is issued, if appropriate, to the employee.
...back to 13 February 2004

Refunds under occupational pension schemes

Employers are required to inform the Inland Revenue within 30 days of the end of a tax year if an employee has been given a refund or payment out of an occupational pension scheme that gives rise to a chargeable event. The document used for this purpose, form 1(SF), has been revised.
(Source: www.inlandrevenue.gov.uk/pensionsschemes/1sf.pdf )
...back to 16 January 2004

P35 Return for 2003/04

A sample of the final version of the new four-page Employer's Annual Return for 2003/04 is available to view. The major change is to the reconciliation section of the form.
(Source: www.inlandrevenue.gov.uk/ebu/pnforms.htm )
...back to 26 December 2003

Year-end forms - changes and guidance

The latest copy of the Notes for Payroll Software Developers provides information about changes to year-end forms and guidance about completing them.

P11 Deductions Working Sheet for 2004/05

In the NICs section, columns 1b and 1c are used to record the amount of earning between the lower earnings limit and the earnings threshold, and between the earnings threshold and the upper earnings limit. Although most employers using these record sheets are likely to look up the figures in the NICs Tables, where they are shown in whole pounds, the new form includes a column for recording pence. This is intended for those employers who calculate NICs using the exact percentage method.

The form also includes a reminder that if, at the year end, the totals of columns 1b and 1c include pence, they should be rounded down to the next whole pound. Only whole pounds are reported in columns 1b and 1c on form P14.

P14 Summaries and P60 Certificates

These forms will be available to order from the Employer's Orderline from February 2004 in the following formats. The single sheet P60s are intended for employers who file P14s electronically.

• P14/P60(Manual) Landscape - three-part form for manual completion
• P14/P60(CL) Continuous Landscape - three-part continuous stationery for use with impact printers
• P14/P60(CP) Continuous Portrait - three-part continuous stationery for use with impact printers
• P14/P60(LL) Laser Sheet Landscape - sheet feed form for non-impact printers
• P14/P60(LP) Laser Sheet Portrait - sheet feed form for non-impact printers
• P60 Laser Sheet - a single sheet P60 for use with non-impact printers
• P60 Continuous - single part continuous stationery for use with impact printers.

There will be no changes to the multi-part P14/P60 sets for 2004/05. However, the single-part P60s, intended for use by large employers required to file P14 returns electronically for 2004/05, will incorporate new boxes showing 'Total for year' figures of pay and tax deducted.

P14 employee personal details

Form P14 asks employers to provide the employee's NI number, date of birth and private address. This information is used only to help allocate tax and contribution payments to the correct record. They are not compared with, nor used to update, the details that are already held by the Revenue for each employee. The employer should notify the tax office separately of any changes to those details.

P35 Annual Return

The P35 Employer's Return is a much larger, 4-page folded document for 2003/04, as a result of the addition of boxes for the reconciliation of SPP and SAP recoveries and NIC compensation on payments of SPP and SAP. The box for NIC rebate is removed as this is not recorded separately from 2003/04. The front page provides guidance and key dates, pages 2 and 3 are devoted to the reconciliation section, and the back page has the checklist, the pension scheme ECON section, and the certificate and declaration.

P11D Expenses and Benefits Return

There are two significant changes to form P11D for 2003/04 relating to the calculation of the car and fuel benefit charges:

• the two boxes for recording the value of accessories are merged into a single box, covering accessories added when the car is first made available and those added afterwards.
• a new date box is added to show the date on which the provision of free fuel was withdrawn during the tax year, and a tick box to indicate if the provision of the free fuel was reinstated during the year.

In connection with the second of these changes, the Inland Revenue has identified a potential problem when calculating and reporting the fuel benefit charge. It occurs only where

• an employee has had two (or more) cars during the year, and
• the fuel benefit is withdrawn during the year.

In this situation, form P11D has a box for reporting the date the fuel benefit was withdrawn. The fuel benefit charge is reduced in proportion to the number of days in the year that fuel for private use was not available.

However, the reduction only applies to the car that was in use when the benefit was withdrawn. The form gives the impression that, where two cars are being reported for the year, the reduction applies to the combined cash equivalents of both cars.

Example: Two cars are provided during the year, each for six months (183 days each). The fuel benefit charge for one car is £;2,520 (e.g. £;14,400 ÷ 366 × 183 × 35%) and for the other is £;1,080 (e.g. £;14,400 ÷ 366 × 183 × 15%). If free fuel had been available for the full year, the combined cash equivalent would be £;3,600.

If the free fuel benefit is withdrawn after nine months, on 5 January 2004, that date would be entered on form P11D. The fuel benefit was only available for 275 days out of the 366 days in the tax year. If the reduction is based on the combined value of both cars, it would be £;2,704 (i.e. £;3,600 ÷ 366 × 275).

However, to be correct, the reduction only applies to the second car. The fuel benefit was only available for 92 days, so the reported value should be £;542 (i.e. £;1,080 ÷ 183 × 92). The combined cash equivalent is £;3,062 (i.e. £;2,520 for the first car, plus £;542 for the second car).

If P11D Working Sheet 2 is used to calculate the cash equivalent of each car, the calculation should be done correctly. However, for this year only, to assure the tax office that the combined value is correct, the Inland Revenue is asking, in this particular situation only, for employers to complete two P11D returns, showing one car on the main return, and the other car on the additional return. Note, however, that the main return should show the combined cash equivalent for both cars, even though only one car appears on that form, plus any other reported benefits.

National Insurance Numbers

The Inland Revenue has repeated its previously provided guidance as to what should be entered in the NI number box of forms and returns when the employee's correct number is not known. Note that there is now only one situation where a temporary number may be used, and that it does not apply to any paper returns.

Tax credit form TC703

Form TC703 is currently used by the Tax Credit Office to confirm an agreement that has already made with an employer to stop payment of Working Tax Credit after payments have begun. The form will also be used in future as a cancellation form, to confirm an agreement that has already made with an employer that payment of Working Tax Credit should not start.
(Source: www.inlandrevenue.gov.uk/comp/notes-10-16-v1.pdf )
...back to 12 December 2003

Tax Credit notices

From November 2003, employers will be able to receive the full range of tax credit notices over the Internet, i.e. the TC700 start notice, TC701 amendment notice, TC702 stop notice, TC703 emergency stop notice, and TC704 restart notice. Employers who already use the Internet Service for PAYE can make the necessary arrangements by contacting the Online Services Helpdesk on 0845 60 55 999. New employers enrolling from 29 October will automatically be set up to receive the forms electronically.

From April 2004, employers will be able to send declarations electronically to the Tax Credit Office that they cannot apply a TC700, TC701 or TC704 notice. (Source: www.inlandrevenue.gov.uk/comp/notes_10_15.pdf )
...back to 4 October 2003

P11D format for 2003/04

The final format of the P11D for 2003/04 has been confirmed. There are three changes altogether:

• the two boxes for recording the value of accessories are merged into a single box, covering accessories added when the car is first made available and those added afterwards.
• a new date box is added to show the date on which the provision of free fuel was withdrawn during the tax year, and a tick box to indicate if the provision of the free fuel was reinstated during the year
• in the "Note to Employer" section at the top of the form, the instruction "Send the completed P11D and form P11D(b) to the Inland Revenue office by 6 July 200" has been moved to the end of the section.

(Source: www.inlandrevenue.gov.uk/comp/notes_10_15.pdf )
...back to 4 October 2003

End of year returns for 2003/04

P38A Supplementary Return
This annual return is completed at the year-end in respect of employees for whom no P14 or P38(S) is being filed. The return is submitted where the employer holds a P46 that has been completed at either Statement A or Statement B by the worker, and the worker was paid less than the NICs earnings threshold every week.

This instruction has been incorrect for a number of years as the guidance in booklets E13 and E10 clearly states that a payroll record must be created for any employee whose earnings exceed the NICs lower earnings limit and, at the year end, a P14 must be submitted.

The P38A for 2003/04 will make it clear that, for the supplementary return to be used, the worker must have been paid less than the NICs lower earnings limit every week.

P35 Employer's Annual Return There are substantial changes to the format of the P35 return. For 2003/04 it is a four-page folded document. The front page provides guidance and key dates, pages 3 and 4 are devoted to the reconciliation section, and the back page has the checklist, the pension scheme ECON section, and the certificate and declaration.

For the purposes of clarity, the wording of the first part of Question 6 in the checklist has been changed to "Do the rules relating to services provided through an intermediary (sometimes known as IR35) apply to any work carried out by any worker listed on this return?"

In the enlarged reconciliation section, new boxes are provided for SPP recovered, NIC compensation on SPP, SAP recovered, NIC compensation on SAP, total of statutory payments recovered, and total of NICs/Tax and Student Loans. The boxes for NIC rebates and Net NIC are removed. There are, therefore, four more boxes than on the 2002/03 return, making 32 in all.
(Sources: www.inlandrevenue.gov.uk/ebu/pnforms.htm
www.inlandrevenue.gov.uk/ebu/paye_techpack/eoy2004_d4changes_v1.0.pdf)
...back to 25th July 2003

Form changes for 2002/03

P11, P14 and P60
There will be few changes to the forms that will be used from April 2002. The Revenue had intended to introduce a number of improvements, especially to the amount of information that is required on forms P11 and P14/60, but has decided to delay any significant changes until April 2003 when layouts will have to amended to reflect the introduction of Statutory Paternity Pay and Paid Adoption Leave.

The changes that will be made to forms P11 and P14/60 from April 2002 are intended only to make the forms look different from those in use during 2001/02. The tax year will be printed in large type and the heading bands across the forms will be in pale blue instead of orange.

P11D
There will be no change to the format and box references on form P11D for 2001/02. The only change is a clarification in the instructions for completing the "Dates car was available" boxes in section F, Cars and car fuel. Dates should only be entered in those boxes where a new car is made available or an old car is withdrawn during the tax year. If a car is available for the full tax year, no entries should appear. For example, if a car becomes available on 10 September 2001 and is still available at the tax year-end, the only entry will be "10/09/01" in the "from" box, and no entry in the "to" box.

The instructions against Part E on form P11D, and the equivalent on form P9D, for 2002/03 will be amended in line with the new statutory scheme for mileage payments. See the section "Reimbursement of mileage in private vehicles", below. P46(Car)
The P46(Car) form has two changes from April 2002. The first is the addition of a new fuel type category "L", to be used for cars with diesel engines that meet the Euro IV standard and that do not, therefore, have the 3% diesel supplement. The second change is the removal of the "expected yearly mileage" reporting requirement. Annual business mileage will no longer by used to determine the car charge from April 2002.

Substitute forms
The address for obtaining approval for substitute forms has changed. It is now: Rita Patel, Inland Revenue, Forms and Information Delivery, 4th Floor, Melbourne House, Aldwych, London, WC2B 4LL; Telephone: 020 7438 4264; Fax: 020 7438 6807.

Code "NI"
The Revenue has also clarified the use of the code "NI", used when completing the P11 Deductions Working Sheet in two specific situations. If an employee does not present a P45, works for no more than a week, and earns between the LEL (£;72) and the PAYE threshold (£;87), no P46 is issued and the code "NI" is used as the tax code on the P11. Similarly, if the employee has to complete a P46 but has earnings between the LEL and the PAYE threshold, the P46 is not sent to the tax office and code "NI" is used on the P11. Those are the two situations defined on cards 4 and 5 of the Employer's Help Cards. There is no change to these instructions.

It must be stressed, however, that these procedures are aimed at employers who operate a manual payroll. Employers with a computerized payroll are more likely to submit a P46, in the absence of a P45, on every occasion and use the tax code identified by the P46.

The Revenue's concern is that the code "NI" is not, in fact, a tax code but only a designation used in the very specific situations described. It should not, therefore, appear as a tax code on year-end forms and system developers have been asked to ensure that it is not printed on P14s and P60s.
Payroll Briefing 210 - 11 October 2001