Car Benefit in Kind and 45p per mile

Car Benefit in Kind and 45p per mile

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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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By thehaggis
26th Oct 2015 19:43

You are correct

MAR cannot be claimed in respect of a company vehicle.

s231(3)(b) ITEPA

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By Jackie0802
27th Oct 2015 10:37

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.

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Replying to Paul Crowley:
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By thehaggis
27th Oct 2015 17:20

Not P11D

Jackie0802 wrote:

If the employer decided to pay him 45p the 34p difference would become a taxable P11D issue.

It would be a PAYE issue!

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By Marion Hayes
27th Oct 2015 17:30

Not PAYE

His employer should be advised not to payroll the BIK - unnecessary NIC is being charges that way

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By thehaggis
27th Oct 2015 23:28

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.

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By soundadvice
27th Oct 2015 22:40

He claimed the 34p (45p less 11p) per mile on his tax return (which he completed and filed himself) disclosing the full details in a white box note and HMRC happily accepted it as an allowable expense and gave him a repayment on the 34p per mile at 40%!!

He has asked me to do his 14/15 return. I have told him that with a company car he can only claim the difference between the advisory fuel rate and 11p and that he should file an amended return for 1314.

I don't know why his employer puts the BinK through the payroll but its there clear as day on his payslip as "car benefit" and it is included in gross taxable pay and taxed! His employer is a FTSE 100 company so i think I will struggle to get them to change their ways!

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By Ruddles
28th Oct 2015 11:34

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.

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By ihtp001
28th Oct 2015 13:55

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 (????)

 

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Portia profile image
By Portia Nina Levin
28th Oct 2015 14:29

It is still a company car for tax purposes. It is just that the cash equivalent of the benefit is nil.

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By pauljgoodman
28th Oct 2015 16:43

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)

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By soundadvice
29th Oct 2015 16:57

Yes .. the car benefit is added to gross pay .. the tax is calculated and deducted from the total .. and then the value of the benefit is deducted to reach the amount he is paid.

His P60 shows his salary plus the value of the car benefit as the "total for pay from that employment".

So does that mean there might be mileage in IHTP's idea or should I treat it as a company car and only agree to the advisory fuel rate and advise a 45p claim is not allowable?

Thanks

 

 

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Portia profile image
By Portia Nina Levin
29th Oct 2015 17:16

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.

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By soundadvice
29th Oct 2015 19:53

Thanks Portia. I agree with that and appreciate the no holds barred response.

I was just hoping against hope that there might have been something in IHTP's muse.

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By Kate Upcraft
30th Oct 2015 12:44

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

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By kirstiej
30th Oct 2015 17:34

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?

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By psimonparsons
30th Oct 2015 18:35

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.

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