EIM71318 - Tax treatment of payments under working rule agreements: SA return and forms P9D and P11D
Self assessment returns
Some payments made under working rule agreements are subject to PAYE by the employer and should appear on year end PAYE returns, such as the P60. If the employee is required to submit a self assessment return he or she should include the figures from the P60, including the working rule agreement payments, on the employment pages of the return.
Payments made free of tax under the terms of a working rule agreement do not need to be returned unless the employee requests a deduction for the same type of expense under Sections 337 to 338 ITEPA 2003 (see EIM71305). In this event any expense payments made by an employer which relate to the type of expense for which the employee is seeking a deduction must be returned in box 16 of the employment pages of the self assessment return.
Forms P9D and P11D
For 2015/16 and earlier for employees in excluded employments (see EIM20007), amounts of travelling and lodging allowances payable free of tax under the national arrangements are not regarded as pay for tax purposes and need not be returned by employers on forms P9D.
All payments of travelling and lodging, etc. allowances under working rule agreements should be taken into account for threshold purposes in determining whether or not an employee is in an excluded employment as for whether forms P11D should be submitted. However, such payments need not be returned on forms P11D where they are made without deduction of tax under the national arrangements.
Such payments may not be appropriate for inclusion in a formal dispensation (see EIM30051 onwards) as the underlying expenses may not fall within the strict terms of Sections 337 to 338 ITEPA 2003 (see EIM31800 onwards). You may nevertheless give appropriate written authority to employers, when required, not to deduct tax from working rule agreement allowances under the national arrangements.