You’ll soon need to prepare Forms P11D for 2018/19. Like many employers this might be the first time you need to include benefits provided to employees through salary sacrifice arrangements. What do you need to know?

OpRA recap

Salary sacrifice schemes, which HMRC calls optional remuneration arrangements (OpRAs), involve employees giving up salary in exchange for benefits in kind where the tax and NI payable is less than that on the salary given up. Since 6 April 2017 new OpRAs have been subject to anti-avoidance rules, with some exceptions (see The next step ) which cancel any tax and in part the NI savings. However, OpRAs in place before 6 April 2017 weren’t caught by the anti-avoidance rules until a year later. That means for many businesses 2018/19 is the first year they need to report OpRA-related benefits on FormsP11D.

What to report

The amount to show on FormP11D is the greater of the taxable value of the benefit in kind using the usual rules but ignoring exemptions, and the pay the employee gave up in exchange for that perk. Example. Olly works for Acom Ltd. In March 2017 he exchanged £60 per month of his salary in return for Acom providing him with a mobile phone, which is a tax and NI exempt perk. Acom pays £50 per month under a business contract for the phone. However, because of the OpRA rules the exemption is ignored from 6 April 2018. This means it must report on Form P11D the greater of the taxable amount, i.e. £600 (£50 x 12) and the salary Olly gave up, i.e. £720 (£60 x 12). Trap. Where the benefit you provided to an employee is a company car, special rules have recently been made for valuing the salary given up and the taxable value of the benefit (see The next step ). However, these don’t take effect for the 2018/19 P11Ds so take care not to bring them into your calculations.

Where to report

The P11D includes sections for most types of benefit in kind and so naturally you report the taxable amount caught by the OpRA rules in the appropriate boxes. However, the P11D doesn’t mention perks which would be exempt but for the OpRA rules (like Olly’s phone). Instead you enter details in section M – “Other items”.

What to exclude

Don’t include on FormP11D benefits in kind which you have “payrolled”, i.e. collected the tax by increasing for PAYE tax purposes only the amount of the employee’s salary. This exclusion from the P11D applies to benefits caught by the OpRA rules as well as those which aren’t.

Making good

If an employee makes a contribution towards your costs of providing a benefit (known as making good), deduct it from the figure you report on the P11D . To work out the figure to enter on the P11D deduct the amount made good from the taxable amount of the benefit and the salary sacrificed by the employee and report the greater of the two.