P11d Benefits in Kind: Exemptions, Dispensations & Trivial Benefits

P11d Benefits in Kind: Exemptions, Dispensations & Trivial Benefits. Generally speaking, many of the benefits an employer provides are taxable (both for the employer and employee). There are certain benefits however that fall outside the rules reducing P11d reporting and avoiding tax.

P11d Benefits in Kind: Exemptions

Under the normal HMRC rules most benefits in kind given to employees attract tax for the employer and employee.

In cases where taxable benefits have been provided the employer needs to complete both a P11d form and P11d(b) form.

In some cases however an employer is simply reimbursing their employees for business expenses and in these cases they can use what is known as an Exemption.

What is a Benefit in Kind Exemption

An exemption covers the reimbursed of actual costs business expenses such as:

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

These expenses do not need to report payments made to employees in this way on a P11d or P11d(b).

How to Apply for an Exemption

You don’t actually need to apply for an exemption, unless you are reimbursing at different amounts to the actual costs. 

Make sure you get all receipts from your employees and expense claim forms as evidence for this as well as any other tax claims you make such as corporation tax relief.

You must also have in place an approval process for expenses.

What Happened to Dispensation Agreements?

In years gone by, employers needed to make a dispensation agreement with HMRC. This really just meant letting HMRC know that the business did not provide benefits but did reimburse expenses that are not taxable. That way HMRC knew not to expect to see reimbursed expenses on P11ds or to receive them at all.

Since 5th April 2016, the rules of dispensation were replaced by the Benefit in Kind That means employers no longer need to let HMRC know they are reimbursing expenses and can omit them entirely when it comes to filing P11ds.

Trivial Benefits

HMRC recognises that a business often gives their employees small gifts to say thank you or to motivate.

If the gift given meets the criteria of Trivial Benefits, then there is no tax to pay and the employer doesn’t need to tell HMRC about what has been given.

Read More: HMRC Trivial Benefits 2019/2020

Updated 19 June 2019

Anita Forrest
About Anita Forrest

Anita Forrest is a Chartered Accountant, spreadsheet geek, money nerd and creator of www.goselfemployed.co - the UK small business finance blog for the self-employed community. Here she shares simple, straight-forward guides to make self-employment topics like taxes, bookkeeping and banking easy to understand.