Small businesses are often targeted for in-depth reviews of their compliance systems and procedures by HM Revenue & Customs. When completing the employer year end forms P11D and P11D(b), you should pay careful attention to all expenses reimbursed to employees or directors, especially if any are in the name of an individual rather than that of the business. In addition, any expenses paid directly by the business on behalf of an employee/director must be reviewed.
Unless you have an agreed dispensation in place with HM Revenue & Customs, you must include all travel, subsistence and entertaining expenses paid to employees and directors on the year end forms P11D, even if the expenses have been incurred for business purposes. If you are registered for VAT, the figures reported on the P11Ds records have to be VAT inclusive.
You should keep full mileage logs for every vehicle, whether owned privately or by the company as they can be requested by HM Revenue & Customs in an investigation. You should also ensure that you keep separate figures for each car where there is a change during the year, or where more than one vehicle is available to an employee. The fuel benefit is an 'all or nothing' benefit, so if the business pays for any private fuel and is not fully reimbursed by the employee, the employee must accept the corresponding fuel benefit.
We would suggest you retain all records and information relating to payroll, benefits for six years, which is the period for which the HM Revenue & Customs has powers to investigate your business accounts.
By Jo Nockels
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