In previous years, a company had to produce a form P11d for directors or employees earning more than £8,500 where they had been provided with a benefit in kind or where the company had made expenses payments to or on behalf of their directors or employees. Where these expenses were incurred wholly, exclusively and necessarily by the director or employee in the performance of their duties no tax charge arose for the individual or the company. In order for the company to avoid having to report these reimbursed expenses on form P11ds they could apply to HMRC for a reporting dispensation.
From 6 April 2016 however, HMRC have abolished the requirement for reporting reimbursed expenses on a P11d for any directors or employees as long as certain measures are in place:
- The company is required to have in place formal procedures for documenting and approving reimbursed expenses and ensuring that they are incurred wholly, exclusively and necessarily on behalf of the company. And directors and employees are required to keep proof of their expenses in order for the company to check them.
- The approval should be subject to a review procedure. Where this may not be possible because the company has only one director, that director should ensure that any expenses charged to the company are within HMRC’s guidelines.