ICB brings to your attention that HMRC are writing to some employers reminding them of the requirement to declare taxable loan benefits on form P11D.
The obligation to declare on the P11D remains applicable even if some or all of a loan is repaid within nine months following the end of the company's accounting period.
The beneficial loan calculation can be complicated and we advise looking at HMRC’s guidance. However, in brief and as explained in HMRC’s letter, a loan is beneficial (or ‘cheap’) when it is:
- Owed for all or part of the year in which the directors and employees are employed; and
- With no interest paid, or the interest paid is less than HMRC’s Official Rate of Interest (2.25% for tax year 2024/25)
However, do review HMRC’s Employment Income Manual page 26132 for exceptions other than the above. For example, there is no benefit to be reported on the P11D if the aggregate balance does not exceed £10,000 at any time in the year or the loans are advances for necessary expenses which will be reconciled between employee and employer ‘at regular intervals’.
For Bookkeepers
You may be completing 2024/25 P11Ds at the moment, due by 06 July 2025. Importantly, the letters state that they are not for the purposes of performing a compliance check but should be regarded as a reminder of reporting obligations.
Note also that guidance refer to the fact that the beneficial loan benefit can be payrolled. However, legislation is in place which means that the Official Rate of Interest (3.75% from 06 April 2025) could vary on a quarterly basis. With the possibility of a varying percentage and a complicated calculation anyway, maybe this is the reason HMRC are not mandating payrolling of these benefits from April 2027!
