Car benefit taxation limited to 3 years?

Person had BiK car with tax value of £28145 taxed at 30% = £8443.50 pa! Presumably for 3 years only?

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Friend had BiK car with tax value of £28,145 applied at 30%.

Is this limited to 3 years only as replacement was delayed?

 

Replies (19)

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DougScott
By Dougscott
08th Aug 2022 14:54

No, it's every year.

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By Tax is always taxing
08th Aug 2022 15:15

Why would it be limited?
Doe he still have the benefit of using the car?

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By EddieReddy
08th Aug 2022 16:48

You mean he pays tax at his personal rate on the 30% of the list price, you make it sound as if the £8,443 is his personal tax cost of having the car. If he's a lower rate taxpayer then it probably compares very favourably with leasing the same car, so life's not all so bad is it?

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Replying to EddieReddy:
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By [email protected]
08th Aug 2022 22:46

The tax value of the vehicle is £28,145 charged at 30% pa for each tax year.
However after 3 years 2 months the amount subject to tax is greater than the tax value!
Fuel costs are allowable as only refunded for business use.

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Replying to [email protected]:
RLI
By lionofludesch
08th Aug 2022 23:18

nigelsennett-AT-btinternet.com wrote:

The tax value of the vehicle is £28,145 charged at 30% pa for each tax year.
However after 3 years 2 months the amount subject to tax is greater than the tax value!
Fuel costs are allowable as only refunded for business use.

Aye, well, that's the sort of thing you need to consider before buying a gas guzzler.

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Replying to [email protected]:
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By Hugo Fair
09th Aug 2022 00:20

Are you saying the P11D value of the vehicle is £93,817 - and that if falls into the BiK band of 30% due to its CO2 emissions value, so the value of the BiK for tax purposes is £28,145 (30% of £93,817)?
Or is it MV of £28,145 (so the BiK is £8,443)?

Either way, a BiK is taxed (at the employee's marginal rate of tax) on an annual basis - and is related to the value of that benefit (as defined by the rules for Benefits & Expenses) ... which has NOTHING to do with either the reduced value of the car due to age or to the amount paid in tax by the recipient of the BiK over a number of years.

If you want to pay less tax ... get a less expensive car, preferably one with better CO2 emissions (or even an electric one), or stop having a company-car altogether!

BTW, no idea what you mean by "Fuel costs are allowable as only refunded for business use". If employee is paying for all fuel and getting it refunded by the company (but only for business travel i.e. not for getting to/from the office), then there's no fuel benefit in the first place - is that what you mean?

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Replying to Hugo Fair:
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By [email protected]
09th Aug 2022 01:58

The fuel is not the issue.

The total tax value of the vehicle is £28,145.

30% is applied pa to p11d.

If the car is retained beyond 3 years 2 months the taxable amount is greater than the value!

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Replying to [email protected]:
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By AndyC555
09th Aug 2022 08:42

"If the car is retained beyond 3 years 2 months the taxable amount is greater than the value!"

Yes.

It's something to think about BEFORE providing a company car to an employee.

I had a client who (with checking) thought it was a brilliant idea to lease a second hand Range Rover which had been worth close to £60k when new and had high CO2. Still, the client saved on the minimal cost of seeking advice first.

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Replying to Hugo Fair:
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By EddieReddy
09th Aug 2022 09:49

Hugo Fair wrote:

Are you saying the P11D value of the vehicle is £93,817 - and that if falls into the BiK band of 30% due to its CO2 emissions value, so the value of the BiK for tax purposes is £28,145 (30% of £93,817)?
Or is it MV of £28,145 (so the BiK is £8,443)?

Either way, a BiK is taxed (at the employee's marginal rate of tax) on an annual basis - and is related to the value of that benefit (as defined by the rules for Benefits & Expenses) ... which has NOTHING to do with either the reduced value of the car due to age or to the amount paid in tax by the recipient of the BiK over a number of years.

If you want to pay less tax ... get a less expensive car, preferably one with better CO2 emissions (or even an electric one), or stop having a company-car altogether!

BTW, no idea what you mean by "Fuel costs are allowable as only refunded for business use". If employee is paying for all fuel and getting it refunded by the company (but only for business travel i.e. not for getting to/from the office), then there's no fuel benefit in the first place - is that what you mean?

Aha, I see, I had misread the post (or misunderstood). Maybe get a Tesla Model S next time and pay next to no BiK and save the planet, lol. A 94k car that only emits 125-129 g/km CO2 is kind of interesting, rather intrigued to know what the car is. What is it OP?

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Replying to EddieReddy:
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By Mr_awol
09th Aug 2022 19:15

I’m glad you see. I’m still not entirely sure whether the car has a c£90k list price with £28k taxable benefit or a £28k list with £8k taxable benefit. And neither, judging by responses, are others.

@OP - simple question - and I don’t want you to use ‘tax value is £28k’ in the answer:

What is the list price* of the car, what fuel does it use, and what are the Co2 emissions?

*list price, being brand new RRP, for want of a better explanation

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By Paul Crowley
08th Aug 2022 17:16

Not just the car is it?
Running costs are in the benefit he gets
Less than £1,700 for a free new car, and just fuel to pay? A complete bargain

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RLI
By lionofludesch
08th Aug 2022 22:15

Good news.

HMRC will round the charge down to £8443.

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By SteveHa
09th Aug 2022 10:21

Company cars are a special case. Most benefits in kind are charged on the basis of the cost to the employer. Cars are not. Cars are charged each year based on the CO2 emissions and the list price when new (so a £1,000 second hand car that was £20,000 when new will still be charged based on £20,000).

The list price of the car is simply a part of the calculation. The tax is not tax on the list price of the car.

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Replying to SteveHa:
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By [email protected]
09th Aug 2022 17:45

But surely the tax payer cannot be charged more than £20,000!

That is my point as the assumption was that the car would be replaced after 3 years

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Replying to [email protected]:
RLI
By lionofludesch
09th Aug 2022 17:48

nigelsennett-AT-btinternet.com wrote:

But surely the tax payer cannot be charged more than £20,000!

What's your rationale for that ?

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Replying to lionofludesch:
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By Hugo Fair
09th Aug 2022 18:12

OP appears not to comprehend that the basis of taxation is defined in appropriate legislation ... rather than via some model of 'fairness' constructed by (and existing only in the head of) the OP.

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Replying to Hugo Fair:
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By lionofludesch
09th Aug 2022 18:36

Well, aye, but I could explain it better if I understood why he reckons it's impossible.

In fairness, any asset can be charged BIKs in excess of its cost. It just takes longer.

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Replying to lionofludesch:
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By Mr_awol
09th Aug 2022 20:41

lionofludesch wrote:

In fairness, any asset can be charged BIKs in excess of its cost. It just takes longer.


The example I use as the worst possible company car to have (from a tax perspective) is a battered old Range Rover. It might cost you £5k but you’ll pay tax every year based on over a third of its c£70k list
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Replying to [email protected]:
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By Hugo Fair
09th Aug 2022 18:25

You've ignored my post (and the questions within it) from 09th Aug 2022 at 00:20 ... so it's still not clear what you mean by "charged" in this context (the benefit value or the tax paid)?

However ... an assumption regarding car replacement in the future is irrelevant. The tax on a BiK is calculated for a tax year, based on what actually happened (not mere intentions) during that period.

And as Steve has already pointed out ... when the BiK is provision of a company car, then the calculation process starts with the retail price of that car AS AT when it was new (even if the company never owned it when new).

So the flashier the car and the longer that it is provided as a BiK, the greater the likelihood that the employee may feel (unjustly) 'hard done by'.

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