Are There any Exemptions to Company Expenses?

If you’re an employer and provide expenses or benefits to your employees or directors, you will normally need to tell HMRC about them and pay tax and National Insurance on them. This is done through the P11D form, which is due for submission on 6th July this year, 2017. We are often asked if there are any exemptions – and the answer is yes.

What are the Exemptions?

There are some exemptions that don’t have to be reported. These are routine expenses and include:

  • business travel
  • phone bills
  • business entertainment expenses
  • uniform and tools for work

To qualify for an exemption, you must be either be:

  • paying a flat rate to your employee as part of their earnings – this must be either a benchmark rate or a special (‘bespoke’) rate approved by HMRC
  • paying back the employee’s actual costs

You must deduct and pay tax and National Insurance on all other benefits and expenses that are given to your employees – and this included directors. You must report them to HMRC as normal.

You don’t need to apply for an exemption if you’re paying HMRC’s benchmark rates for allowable expenses.

You only need to apply for an exemption if you want to pay your employees bespoke rates.

You’ll have to give HMRC evidence that the rates you’re suggesting are based on your employees’ actual expenses.

Checking expenses

You must have a system in place to check payments you make at benchmark or bespoke rates.

Your employees aren’t allowed to check their own expenses, so someone else within your company needs to do this to make sure they’re legitimate.

Importantly, HMRC’s advice is to tell your employees to keep proof of their expenses, for example receipts or bills, in case you need to check them.

Contact Us for Help With Your Company’s Expenses

Sounds simple, doesn’t? In many ways it is, but if you are a small business, perhaps without a dedicated Finance/HR department, then it can seem more complex, especially when time is running out.

If you need help with expenses, P11D or any part of your payroll, contact us or call us on 0121 422 0550.

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