Car Benefit and Salary <£8000

Car Benefit and Salary <£8000

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An employee works for a company but takes absolutely no cash payments, just a company car. The benefit of this car is £7866.
The employee is not a director

Does this mean there is no tax to pay on the benefit?
NH

Replies (7)

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By CathyB
12th Dec 2006 10:50

Car benefit
Sorry Ray, you are quite right. You only need to gross up where the employment is for less than a year, not where it is part-time.

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By CathyB
11th Dec 2006 17:23

Car benefit
It is difficult for anyone to qualify as benefits and salary not exceeding £8500 under NMW. The rule is "remunerated at the rate of £8500 per annum" which I understood to mean pro rata for part-timers.

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By raycad
11th Dec 2006 22:05

Reality check
Let's get real here. Nobody - I mean nobody - works for a company for no salary, just a company car, without there being some kind of quid pro quo. As has been indicated already, any close family relationship with a director of the company will result in the the benefit being assessed on said director. And if the employee is a participator the benefit would be treated as a distribution (effectively taxed as a dividend; no CT deduction.)

If the employee is part-time then, again as already commented on, there are NMW ramifications.

On Cathy's point, however, there is no pro-rating of a part-time employee's earnings. "At the rate of" means what it says on the tin: if you work 20 hours a week at £6 per hour then you are being paid at the rate of £6,240 pa, no more.

What's the real story? We need to be told!

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By User deleted
06th Dec 2006 22:17

What about national minimum wage
I believe many benefits do not contribute to the national minimum wage, so even assuming the value of the car benefit covers the monetary value of the nmw you could have problems if you try to do this.

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By hallsi
06th Dec 2006 22:47

there may be a NMW problem...
if not a director then NMW regs apply but if the employee were part-time and their salary plus BIK were still below £8.5k then they will be regarded as a P9d employee and no tax to pay on this benefit.

if the employee becomes a director then whilst they may not be subject to NMW regs they are automatically subject to P11d rules.

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By Peter Cane
07th Dec 2006 09:28

But...
who is the employee? Is it the spouse of a director? If so, could be taxed as BIK on spouse.

Seems strange that you say employee works for the company, but has no salary.

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By wdr
07th Dec 2006 09:43

There can be a problem if the individual is a participator or th
A little known and less understood provision (ICTA s418 )treats what would have been the 'benefit' as a distribution to the participator concerned. The problem is worse , as the Revenue argue in such cases , on flimsy legal grounds, that an equivalent sum has to be added to the profits subject to corporation tax.;their supposed justification is ICTA s337A(1)(a)

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