Is P11D(b) Still Required with Payrolling Benefits?
When employers decide to move to payrolling benefits in kind, a key question often arises, does this eliminate the need to submit a P11D(b)?
Many businesses assume that integrating benefits directly into payroll means they no longer need to deal with end-of-year submissions like the P11D or the P11D(b). However, this assumption can be misleading and may lead to compliance issues if not properly addressed.
Despite the advantages of payrolling benefits, employers must understand that the obligation to submit a P11D(b) often still applies, especially in relation to Class 1A National Insurance contributions (NICs).
This article clarifies the current HMRC guidelines, explores when a P11D(b) is required, and outlines what employers need to do to remain compliant with benefit reporting obligations.
What Is the P11D(b) Form and What Is Its Role in Benefit Reporting?
The P11D(b) is a form used by employers in the UK to declare the total amount of Class 1A NICs due on benefits in kind provided to employees and directors during a tax year. This includes benefits like company cars, private medical insurance, and other non-cash perks that are taxable.
While employers may opt to report these benefits through real-time payroll (payrolling), they are still liable for the Class 1A NICs on those benefits. The P11D(b) is therefore a statutory declaration confirming either:
- The total amount of Class 1A NICs due on benefits reported via P11D forms; or
- The total Class 1A NICs due on payrolled benefits
HMRC uses this form to ensure all liabilities for employer National Insurance contributions are properly recorded and paid. Failure to complete and submit the form correctly can result in penalties, even if benefits are already being taxed through payroll.
What Does Payrolling Benefits in Kind Mean for Employers?
Payrolling benefits in kind allows employers to include the taxable value of certain benefits directly through the payroll system. This means the employee’s income tax is deducted in real time each month, instead of being handled later through a P11D.
The benefits that can be payrolled include common items such as:
- Company vehicles
- Health insurance
- Gym memberships
- Living accommodation
- Non-cash vouchers and expenses
This method offers a more transparent experience for employees, who can see the taxation of their benefits as part of their regular payslip. It also reduces the administrative burden at the end of the tax year by removing the need to submit individual P11D forms, provided the employer has registered with HMRC before the start of the tax year.
However, it’s important to note that payrolling benefits does not replace the P11D(b). The liability to pay Class 1A National Insurance remains unchanged and must still be reported. Employers can reduce their risk of non-compliance by using trusted payroll providers, who specialise in accurate benefit reporting and HMRC submissions.
Is P11D(b) Still Required with Payrolling Benefits?
Yes, the P11D(b) form is still required even if an employer is payrolling all benefits in kind. HMRC regulations make it clear that although payrolling replaces the need for a P11D for each employee, it does not eliminate the responsibility to report and pay Class 1A NICs.
This applies to both traditional benefits and those covered under optional remuneration arrangements (OpRAs) such as salary sacrifice schemes. In these cases, the “relevant amount”, which may be higher than the cash equivalent, must be used to calculate Class 1A NICs.
Even when payrolling is in full effect, a P11D(b) must be submitted to:
- Declare that payrolled benefits were provided
- Calculate and confirm the Class 1A NIC liability
- Meet statutory deadlines and avoid fines
How Are Class 1A National Insurance Contributions Calculated?
Class 1A National Insurance contributions (NICs) are calculated on the cash equivalent of the benefit provided to employees. In the case of Optional Remuneration Arrangements (OpRAs) such as salary sacrifice, the employer must use the higher of the amount sacrificed or the benefit’s value to work out the liability.
Employers are responsible for calculating and declaring the correct Class 1A NICs total on the P11D(b) form. Accurate calculations depend on good record-keeping and a clear understanding of what qualifies as a taxable benefit.
Employers must also consider the total cost of providing the benefit over the year and apportion it correctly across pay periods when payrolling. Even if tax is deducted in real time, the Class 1A NIC is an annual liability, and must be paid by the employer by the statutory July deadline.
Example: Employer Payrolling Company Car Benefit
An employer decides to payroll the company car benefit for an employee. The annual taxable value (cash equivalent) of the car benefit is £3,600.
Before the start of the tax year, the employer registers for payrolling via HMRC’s online Payrolling Benefits in Kind service and selects “company car” as the benefit to be payrolled.
Once registered:
- HMRC removes the car benefit from the employee’s tax code.
- The employer calculates the benefit’s taxable amount: £3,600 per year.
- This amount is evenly spread across 12 pay periods, so £300 per month is added to the employee’s taxable income via payroll.
Throughout the year, the employee pays tax on this monthly benefit amount as part of their regular PAYE deductions.
However, at year-end, the employer must still calculate Class 1A NICs on the full £3,600 and declare it on the P11D(b) form.
Calculation for Class 1A NIC (based on 13.8% rate):
£3,600 × 13.8% = £496.80
This amount is paid by the employer and submitted to HMRC by 19 July (cheque) or 22 July (electronic), alongside the completed P11D(b).
What Records Must Be Maintained to Support the P11D(b)?
Employers are legally required to keep comprehensive records of all benefits provided to their employees. These records are essential not only for calculating Class 1A NICs but also to defend any future HMRC audit or enquiry.
Records should include:
- Description of each benefit
- Name and job title of the recipient
- Start and end dates for the benefit
- Value of the benefit and method of calculation
- Any salary sacrificed (if OpRA applies)
These records should be retained for at least three years after the end of the tax year in question.
What Are the Key Deadlines for P11D(b) Submission and Payment?
Missing deadlines related to P11D(b) forms and Class 1A NIC payments can result in financial penalties and interest.
Action | Deadline |
Submit P11D(b) to HMRC | 6 July after the tax year ends |
Payment by cheque | 19 July |
Electronic payment | 22 July |
HMRC applies a penalty of £100 per 50 employees for every full month the P11D(b) is late. In addition, interest may be charged on any unpaid National Insurance contributions.
It is vital that employers submit their forms and make payments on time to avoid unnecessary costs and reputational damage.
How Does Payrolling Compare to Traditional P11D and P11D(b) Processes?
Employers often find the distinctions between the various reporting methods confusing. Here’s a breakdown to clarify how they differ:
Aspect | Payrolling Benefits | P11D Reporting | P11D(b) Submission |
Tax collected via payroll | Yes | No | No |
Individual benefit form needed | No (if payrolled) | Yes | No |
Class 1A NIC declared | No | No | Yes |
Submission deadline | N/A | 6 July | 6 July |
Required if all benefits payrolled | No | No | Yes |
While payrolling simplifies taxation for employees, it still requires careful internal reporting and a P11D(b) at the end of the year.
What Happens If Employers Fail to Submit a P11D(b)?
Failure to submit a P11D(b) form, or to pay Class 1A NICs on time, may result in automatic financial penalties and compliance investigations by HMRC.
HMRC can impose fines starting at £100 per 50 employees per month late. Persistent failure or inaccuracies may lead to interest on unpaid liabilities and more significant penalties if HMRC considers the failure deliberate.
Moreover, failure to keep records or incorrectly assuming that payrolling removes the P11D(b) obligation may affect an employer’s compliance record, which can be a concern during future HMRC inspections.
How Can Employers Register for Payrolling Benefits?
To payroll benefits legally, employers must register with HMRC before the start of the tax year, usually by 5 April. This registration tells HMRC that the employer intends to report certain benefits through the payroll system instead of via P11Ds.
The registration process involves:
- Logging into the HMRC PAYE Online account
- Navigating to the payrolling section
- Selecting the specific benefits to be payrolled
- Confirming and submitting the registration
Once registered, employers must ensure that these benefits are consistently included in the payroll, and that corresponding P11D(b) reporting is still completed as required.
Frequently Asked Questions
Do I still need to submit a P11D(b) if I’ve payrolled all benefits?
Yes, the P11D(b) is required to declare the Class 1A NIC liability, even if no P11Ds are submitted.
What is the deadline for submitting the P11D(b)?
The P11D(b) must be submitted by 6 July following the end of the tax year.
Is there a penalty for submitting the P11D(b) late?
Yes, HMRC charges £100 per 50 employees for each month (or part month) that the form is late.
Can I register for payrolling after the tax year begins?
No. Registration must be completed by 5 April for the following tax year.
What happens if I don’t pay Class 1A NICs on time?
Late payment can result in interest charges and further penalties from HMRC.
Are all benefits subject to Class 1A NICs?
Most taxable benefits are subject to Class 1A NICs, unless explicitly exempt.
Here at TunedIn Payroll Limited you can find payroll experts who can provide dependable, comprehensible and cost-effective payroll outsourcing services. Please contact us.