However some expenses do not meet the test because some part of the expense paid for by the employer has a non-business purpose. The prime example of this is private telephones. If the contract is between the employee/director and the telephone company, HMRC would expect the line rental to be reported on P11D. This has historically been the case, and we thought this would be the case going forward. However HMRC have issued revised guidance in the October 2016 Employer Bulletin, conveniently including this guidance right at the end of the bulletin!!
The bulletin states that such payments should not be reported on P11D, but instead the non-deductible expense (in this example the line rental and private calls) should be treated as extra pay in the period that the reimbursement was made. In other words, payrolled!
Of more concern is that if the private portion of the expense cannot be identified at the time of the payment, the whole amount of the expense must be treated as earnings and payrolled. The business element must then be recovered on the Self-Assessment or via a claim to HMRC ( form P87).
These new rules apply to any ‘private’ payment made on behalf of the employee that would previously have been reported on P11D.