Seem to have mental block on this one!
Client gets a company car from his employer. It is leased and he has the benefit in kind value (not the lease payment) added to his income on his company's PAYE and so he is taxed at source (no P11D).
He is reimbursed by his company for business mileage at 11p per mile (the fuel rate only).
He has been advised that he can claim the difference between the 11p and 45p on his tax return?
This doesn't sound right or does the fact that he is effectively paying for his car via PAYE mean he can actually claim the 34p difference?
As I understand it the 45p is to cover ALL the costs of running the vehicle if the employee is using his own car which of course he isn't here.
But thought I should ask in case I am missing something fundamental here!!
Replies (16)
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You are right
The 45p figure applies to employees own car. He hasn't got the same costs if he is using a company vehicle so the tax free mileage allowance is much lower. If the employer decided to pay him 45p the 34p difference would become a taxable P11D issue.
Not P11D
If the employer decided to pay him 45p the 34p difference would become a taxable P11D issue.
It would be a PAYE issue!
Not PAYE
His employer should be advised not to payroll the BIK - unnecessary NIC is being charges that way
Not a BIK
It is a cash payment made by an employer to an employee. It is a payment of PAYE earnings.
EDIT: I misread Marions post. I agree that the car is a BIK and putting it through the payroll is not always a good idea.
Puts you in an unenviable position
Notwithstanding the fact that HMRC 'happily accepted' the return, the return is incorrect and you need to advise him to correct it (as you have done). The fact that HMRC have not challenged it may simply mean that no-one has bothered to check it or, if they have, the Officer involved doesn't understand the rules.
No benefit in kind?
I assume that the employer is adding the taxable value of the company car to his gross pay, then deducting the same value from his net pay.
The deduction can then be classed as a payment for the private use of the car. This would then mean that he is effectively paying the employer the full taxable value of the car (ie. the full value is made good). See page 48 of HMRC's booklet 480:
"Payments that an employee makes for the private use of the car are deducted from the figure carried forward from Step 7 and can reduce the benefit charge to nil."
If the benefit charge is nil, then there is no benefit, so it is no longer a company car for tax purposes, so the 34p per mile can be claimed (????)
It is still a company car for tax purposes. It is just that the cash equivalent of the benefit is nil.
No benefit!
Regarding ihtp001's comment, if the taxable benefit is added to the gross pay, and then deducted from the net pay, I don't see how you can say that the employee has paid for his benefit. He has simply paid the tax in monthly instalments without having a coding adjustment for the benefit, or paying at the year end via SA. It appears to be an example of voluntary payrolling benefits, which I have come across once or twice (and it was a large employer who one assumes does know what it's doing)
No. It is still a frigging company car. He cannot claim AMAR. He cannot claim any additional tax relief for his mileage. It is just that if the mileage rate is within HMRC's advisory rates it is not taxable on him.
Payrolling benefits
I think it's worth stepping in to clarify a few points on payrolling benefits given the registration tool has just been launched by hmrc for the roll out of voluntary payrolling (but on a formal basis) in April 2016 as more clients may well see this treatment on their payslip. When a BIK is payrolled a notional value (the CEV minus any made good /number of pay periods left in the year) is added to gross taxable pay. This achieves the tax payment and no money is actually paid so no corresponding deduction is made. The notional amount is not added to ni'able pay as class 1a is due at year end, so there is no class 1 NICs paid by employee or employer. I wrote about payrolling registration in my recent article for accounting web
Is the client confusing 'car benefit' with a 'car allowance' where a nominal amount of the employees salary is supposed to go towards their vehicle expenses, but in effect it is no different to other salary?
It's either a company car or a private car
It's either a company car subject to company car tax or not. Either way, if it is a company car then it must still be reported on P11D whether it is patrolled or not. It is not until the 2016/2017 tax year that payrolled benefits remove P11D requirements. also p46(car) is required.
Now if this is an employee provided car, either purchased or personally leased, then it is a private vehicle for business use.
It could be suggested that HMRC have been hoodwinked into thinking this is their own private vehicle.
45p per business mile or the difference does not apply to a Company Car. Only for a private vehicle used for business mileage.