Motor traders BIK

Motor traders BIK

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So a trader has a trade policy with SDP&C in his name. Put through as an expense for the company.

But the director has personal use of the vehicles, not just consequential either as he actively uses the vehicle for private purposes and commuting to separate job.

Thus a BIk is incurred right?

So how would you treat this?
Maybe charge a nominal sum per month so no benefit in kind, just a payment for services rendered? (Puts his own fuel in. Cars available are low value - so how much to charge? £50 per month??)

Replies (7)

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By Steve Kesby
09th Feb 2014 12:20

HMRC's manuals cover it...

... at EIM23800 onwards.

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By tebthereb
09th Feb 2014 16:47

s144 ITEPA

Director using a company car for private use? Yes that is a BIK issue. See the following for when a car benefit arises.

http://www.hmrc.gov.uk/manuals/eimanual/EIM23020.htm

I think I am right in saying that if the director is required to make a payment for private use, and does so, then under s144 you can deduct the amount paid in calculating the benefit. This can reduce the benefit to nil. See:

http://www.hmrc.gov.uk/manuals/eimanual/eim25250.htm

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By arcon5
09th Feb 2014 20:08

For examples sake, say the car benefit is calculated at £1250.... is this declared on the directors/employees weekly payroll on a pro-rata basis or year end?

Is this sum the amount payable to HMRC? Or merely the sum used to based an NIC on... so you pay 12% on this value?

What if the average changes each month?

 

Sorry, a lot of info available guys - they don't make it easy to process though!!

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By tebthereb
09th Feb 2014 22:50

You don't declare car benefits through the payroll.

A car benefit of £1,250 would be the amount shown on the employee's form P11D. Class 1A NIC would be paid on this amount at 13.8% by the employer.

The employee would put the P11D figure on their tax return and ay tax on the £1,250 at their marginal rate of tax based on their other income.

If you wanted to charge the employee for private use then yes you could take the amount off their net pay monthly or annually, that doesn't really matter and is just down to agreement between the employee and employer.

 

 

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By arcon5
10th Feb 2014 06:11

Okay thanks.

In the above example it would cost the director about £400 per year. Each car is only worth about £400...
Looking closer at the list price of a typical motor the benefit would be about £2100, thus total cost about £700...

To clarify, the price you have to use is when the car is new? The fact he's buying cars in that are 10 years old is irrelevant right?

Is there a better way of doing it?

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By arcon5
11th Feb 2014 07:53

Hi Guys,

From what I read

The car benefit is per car, so if a spouse was using it then it would remain the same? (She's not an employee or director)
But is she was employed then a second car benefit would be applicable for her?

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By tebthereb
11th Feb 2014 21:51

If a car was worth £400 and

If a car was worth £400 and it would cost the director £400 per year in taxes then it might just be preferable to transfer the car to the employee permanently. Of course, a company car benefit is not just about the vehicle value as the benefit also covers the fact that the company would be maintaining the vehicle etc. Transferring a vehicle has other tax implications.

It is the "list price" that you specifically need to look at in calculating the car benefit not value. The list price is basically the manufacturers suggested price, I believe. The fact that a car may be 10 years old doesn't come into the car benefit calculation; the benefit is not reduced down on a scale for age of vehicle.

Yes if you had the spouse of an employee using the company car there would still be just the one benefit. Giving the spouse a car would mean the employee is hit for two car benefits. If each spouse was an employee and there were two cars there would be two car benefits; one for each of them.

There are a few options for providing car/fuel benefits tax efficiently but these would depend on the specifics and you would probably need to take professional advice if you wanted to pursue that. I am sure my firm would be happy to help with something like that; drop me a PM if you like.

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