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penalty charge notice and director

penalty charge notice and director

Didn't find your answer?

Good afternoon,

I know there have been several threads on this but I can not seem to find a definite answer.

A company director received a PCN for overstaying in a car park (own car) and this was paid directly from the company account (the director was visiting a client).

What is the correct treatment for this?

Disallow the expense and decrease the liability on the director's loan?

Allow it but include as a benefit on P11D as a very expensive car park expense?

I seem to recall that the treatment is different for directors and employees.

I would be grateful for your advice.

Replies (36)

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Stepurhan
By stepurhan
13th Jun 2014 12:48

Why did they overstay?

The director was visiting a client, but was this the sole reason for them overstaying?

If so, then the fine is an expense incurred arising from being on company business, not a benefit. For example, if they were only late getting back to their car because the client meeting took longer than expected. If they overstayed because they ran a few personal errands at the same time then it is either a benefit, if claimed as a deductible expense, or should be taken out to director's loan.

Thanks (1)
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By Chipette
13th Jun 2014 12:59

Assuming it's wholly business

Thank you for your answer, stepurhan.


Assuming it's wholly business, and in absence of a dispensation for travel and subsistence expenses, don't I need to include it on P11D though (although no BIK arises)?

 

Would it be a different treatment if they were late in settling the PCN and paid a 100% surcharge?

Thanks

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RLI
By lionofludesch
13th Jun 2014 13:06

Fine - or just an excess charge

What does it say on the back ?

Is it a fine ?  Or an excess charge ?

I've got one from our local council here - it's an excess charge notice but it's a criminal offence not to pay it.

I read that as allowable if you pay on time.  If you pay late, it's not.

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By Chipette
13th Jun 2014 13:15

It will teach me to read properly.

It actually says "penalty charge of X payable no later than XX/XX/2014. The penalty charge will be reduced by a discount of 50% if paid within 14 days".

So I guess they just didn't take the early payment discount!

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By Suntree
13th Jun 2014 13:16

Not allowed for tax

Please note parking fines for directors are not allowed for  CT purposes therefore you will have  add it back when preparing CT computation. 

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Replying to carnmores:
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By Chipette
13th Jun 2014 13:24

Confused

Suntree wrote:

Please note parking fines for directors are not allowed for  CT purposes therefore you will have  add it back when preparing CT computation. 

 

Sorry I am confused now...does this apply to Penalty Charge notices or fines?

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Replying to carnmores:
Stepurhan
By stepurhan
13th Jun 2014 13:48

Reference please

Suntree wrote:
Please note parking fines for directors are not allowed for  CT purposes therefore you will have  add it back when preparing CT computation.
Please can you provide a link for this assertion. Obviously this makes a difference so a reference for the specific treatment for directors as opposed to ordinary employees would be useful.
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Replying to rae10000:
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By Suntree
13th Jun 2014 15:09

http://www.hmrc.gov.uk/manuals/bimmanual/bim42515.htm

In general fines are disallowed under Section 827 ICTA 1988.

If however company pays the fine and then reports it on P11D, then full amount will be allowed for tax.  

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RLI
By lionofludesch
13th Jun 2014 13:21

Agree

But excess charges are fine (pun intended).

You can pay what you like for parking.

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RLI
By lionofludesch
13th Jun 2014 13:36

Penalty

A Penalty Charge is a Fine.

BUT sometimes an excess charge only becomes a penalty if you don't pay on time.  You have to read the notice - they're not all the same.  Has a criminal offence been commited or not ?  That's the key question. Usually there's some mention of legislation for a fine.

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RLI
By lionofludesch
13th Jun 2014 13:42

Wording

If it helps, this one I have is headed

EXCESS CHARGE NOTICE

Then, near the bottom, it says

"Under Section 47(1) of the Road Traffic Regulation Act 1984 (as amended), it is an offence for the driver of a vehicle who has left the vehicle in a parking place to fail to pay the excess charge."

So, it's allowable if it's paid within 14 days.  But not if it's paid later - because then the law has been broken.

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Replying to Kaylee100:
By Steve Kesby
13th Jun 2014 13:52

Are you saying...

lionofludesch wrote:

So, it's allowable if it's paid within 14 days.  But not if it's paid later - because then the law has been broken.

That if it's paid on day 15 there has been a failure to pay?

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Replying to johnjenkins:
RLI
By lionofludesch
13th Jun 2014 13:55

Indeed

Steve Kesby wrote:

lionofludesch wrote:

So, it's allowable if it's paid within 14 days.  But not if it's paid later - because then the law has been broken.

That if it's paid on day 15 there has been a failure to pay?

Yes.  I couldn't be bothered to type in all the details but the deal is pay within 14 days or you're a criminal.

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By Steve Kesby
13th Jun 2014 13:47

Why does it matter...

... whether a criminal offence has been committed or not. Expenditure is only disallowed if the making of the payment is a criminal offence.

Parking in contravention of a local bylaw isn't a criminal offence; it's just the contravention of a local bylaw for which the local authority have the power to levy a penalty.

The expenditure is incurred wholly and exclusively for the company's business, and there's nothing in law to disallow it, irrespective of whether it's a director or an employee.

However, it is the settlement of a pecuniary liability of the director. It's reportable on the P11D and it's liable to class 1 NIC through payroll.

If the director could claim an expense deduction, there would be no need to account for class 1 NIC and the amount ultimately taxable would be nil.

BUT in order to have an expense deduction it would have had to have been incurred wholly, exclusively and necessarily in the performance of the duties of the employment.

Since it was an avoidable expense, it can't be said to have been necessarily incurred.

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Replying to DaveyJonesLocker:
Stepurhan
By stepurhan
13th Jun 2014 13:52

Avoidable?

Steve Kesby wrote:
Since it was an avoidable expense, it can't be said to have been necessarily incurred.
Comprehensive coverage as always.

I am curious on your view on this possibility. If leaving the client earlier would have had a detrimental effect on the business relationship, would that be enough to make it necessarily? A tough thing to prove obviously, but a viable argument?

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Replying to DaveyJonesLocker:
RLI
By lionofludesch
13th Jun 2014 14:26

Bit harsh

Steve Kesby wrote:

Since it was an avoidable expense, it can't be said to have been necessarily incurred.

On that - very strict - interpretation, nothing would be allowable if the employee could have got it cheaper somewhere else.

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By Steve Kesby
13th Jun 2014 14:01

I think you can go back...

... and feed the meter or move the car or whatever it takes. People understand these things. I think it would be impossible to prove otherwise; no tribunal would accept the argument that there was no other way.

Most local authority car parks nowadays, have a pay by phone facility. I've even got the app for the park and ride car park in Oxford.

See HMRC's view in EIM21686 and EIM31215.

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By Chipette
18th Jun 2014 11:43

Not a criminal offence

PCN Issued by the council under Civil Enforcement of Parking Contraventions.

 

 

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By mrme89
13th Jun 2014 14:42

My view is that this is disallowable. See BIM42515.  

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By Steve Kesby
13th Jun 2014 14:49

@mrme89

The final sentence of the first paragraph under the parking fines heading in BIM42515 says that it's allowable in these circumstances? I knew it was there somewhere.

@ lion It isn't whether the amount of the expense is necessary, it's whether the expense that is incurred is necessary.

If I need to travel from London to Manchester for my employment my train fare expense is necessary whether I travel by first class or second class.

This isn't an expense of parking, it's an expense of not parking in accordance with the local bylaws, which wasn't necessary.

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Replying to Duggimon:
By mrme89
13th Jun 2014 14:51

.

Steve Kesby wrote:

The final sentence of the first paragraph under the parking fines heading in BIM42515 says that it's allowable in these circumstances? I knew it was there somewhere.

 

Typo on my part, sorry for the confusion.

I agree ALLOWABLE in these circumstances.

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Replying to Duggimon:
RLI
By lionofludesch
13th Jun 2014 15:09

Fine line

Steve Kesby wrote:

The final sentence of the first paragraph under the parking fines heading in BIM42515 says that it's allowable in these circumstances? I knew it was there somewhere.

@ lion It isn't whether the amount of the expense is necessary, it's whether the expense that is incurred is necessary.

If I need to travel from London to Manchester for my employment my train fare expense is necessary whether I travel by first class or second class.

This isn't an expense of parking, it's an expense of not parking in accordance with the local bylaws, which wasn't necessary.

I'm struggling to see the distinction between that and your choice to travel first class.

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By neileg
13th Jun 2014 14:54

Fine or not

A highway authority (usually the local authority) has the power to levy an excess charge if the parking place is covered by a Traffic Regulation Order under the 84 act. This is not a fine no matter when it is paid to the highway authority. If the driver does not pay within the specified time then the highway authority has the power to start legal criminal proceedings. Only if the court imposes a fine does the payment stop being a charge.

A lot of highway authorities don't bother to take it to court because there's nothing in it for them. When a fine is imposed the cash goes to the court service not the highway authority.

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By Steve Kesby
13th Jun 2014 15:14

Distinction

Paying for first class travel and paying for second class travel are both expenses of travel.

Paying the costs of parking within the local bylaws is an expense of parking. Paying the costs arising from parking contrary to the local bylaws is an expense of contravening a local bylaw, and not an expense of parking.

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Replying to I J Lessels:
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By neileg
13th Jun 2014 15:34

Not quite so, Steve

Steve Kesby wrote:
Paying the costs of parking within the local bylaws is an expense of parking. Paying the costs arising from parking contrary to the local bylaws is an expense of contravening a local bylaw, and not an expense of parking.

Sorry Steve I don't usually disagree with you but I do now. A Traffic Regulation Order is not a bylaw. The TRO gives the highway authority power to do something based on the driver's behaviour, hence the normal parking charges and the excess charge. These are not fines and the breaking of a TRO is a civil matter not a criminal one. Only on the findings of the court can this become a crime and it is the non payment that is the crime not the parking itself.

Many highways authorities, including the one I work for, have had control over on street parking transferred to them. For those that haven't, parking offences are a police matter and then the contravention of the parking restrictions is a criminal act and a fine is applicable. So the question of whether it is a fine or a charge will vary depending where you are in the country. If the 'traffic warden' has a yellow stripe on the cap, they are employed by the police and they issue fines. If they have a blue stripe or wear any other uniform they are employed by the highway authority and issue excess charge notices - often referred to as fixed penalty notices.

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Replying to I J Lessels:
RLI
By lionofludesch
13th Jun 2014 15:50

Not an offence

Steve Kesby wrote:

Paying for first class travel and paying for second class travel are both expenses of travel.

Paying the costs of parking within the local bylaws is an expense of parking. Paying the costs arising from parking contrary to the local bylaws is an expense of contravening a local bylaw, and not an expense of parking.

Agree with neileg, I'm afraid, Steve.

A lot of these petty offences have been decriminalised.

 

Anyway, I love these lengthy debates on whether we can save about a tenner in tax.  :-))

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By Steve Kesby
13th Jun 2014 16:20

@ Neil

The OP said that it was a local authority car park, and so I'd taken it to be a parking place provided by the LA under s. 32(1)(a) of the Road Traffic Act 1984. The local bylaws I was referring to were those that permit people to park in that car park in a manner permitted.

Notwithstanding the fineries though, my point was simply that the expense is not an expense of parking (in the manner permitted), but an expense of contravening what is permitted.

I'm not saying that the extra penalty for not paying within 14 days wasn't necessarily incurred in the performance of the duties of the employment. I'm saying that the whole penalty charge (including the additional amount) was never necessary.

I've never suggested that anything referred to was criminal. Quite the opposite.

@ Suntree ICTA 1988, s. 827 has been revoked and is now found in CTA 2009, s. 1303. It only relates to tax penalties though.

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Replying to Duggimon:
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By neileg
13th Jun 2014 16:44

Sorry Steve, I'm in pedantic mode

Steve Kesby wrote:
Notwithstanding the fineries though, my point was simply that the expense is not an expense of parking (in the manner permitted), but an expense of contravening what is permitted.
I understand what you are saying, I just don't agree. The excess charge is just that, a charge for parking longer than your ticket covers. Yes, it is meant to be a deterent and most people would regard it as a fine but it isn't. If you paid a pound for an hour's parking and came back after 90 minutes and had an FPN for £30 then the cost of parking for 90 minutes is £31.
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Replying to adam.arca:
By mrme89
13th Jun 2014 17:09

Fines

neileg wrote:

Steve Kesby wrote:
Notwithstanding the fineries though, my point was simply that the expense is not an expense of parking (in the manner permitted), but an expense of contravening what is permitted.
I understand what you are saying, I just don't agree. The excess charge is just that, a charge for parking longer than your ticket covers. Yes, it is meant to be a deterent and most people would regard it as a fine but it isn't. If you paid a pound for an hour's parking and came back after 90 minutes and had an FPN for £30 then the cost of parking for 90 minutes is £31.

 

The goverment seems to view them as fines.

 

https://www.gov.uk/parking-tickets/paying-a-ticket

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Replying to Tornado:
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By neileg
16th Jun 2014 09:25

Only after 28 days

mrme89 wrote:
The goverment seems to view them as fines.

https://www.gov.uk/parking-tickets/paying-a-ticket

The wording is a bit loose but this section only refers to it being a fine if you have not paid in 28 days. In 28 days or less you pay a penalty charge to the council, after 28 days it becomes a fine payable to the courts service.

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By Steve Kesby
13th Jun 2014 16:53

So are you saying...

... that the £30 is additional standard-rated consideration for a supply of parking Neil?

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Replying to supremetwo:
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By neileg
16th Jun 2014 09:22

Partly

Steve Kesby wrote:
... that the £30 is additional standard-rated consideration for a supply of parking Neil?

If you mean standard rated for VAT that's a whole other argument!

But consideration for parking, yes that's what I am saying.

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By Paul D Utherone
13th Jun 2014 17:53

I keep seeing the title

and thinking it's SA penalties, BUT it's not! Now isn't this more fun :)

Sorry nothing else to add really, other than I do recall hearing the view espoused at a CPD session once a while back that "if it says 'excess charge' then it's allowable as an expensive parking fee, but if it's a 'parking fine/penalty' then it's not"

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RLI
By lionofludesch
16th Jun 2014 10:32

Quite

The wording on the notice I saw was that the offence is failing to pay the excess charge.

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By Steve Kesby
16th Jun 2014 12:44

@ Neil

See VATSC57600 (excess charge not consideration, but a payment for breach of contract), contrasted with the Vehicle Control Services decision (where the charge was considered to be contractual).

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Replying to Wilson Philips:
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By neileg
16th Jun 2014 15:03

@Steve

Steve Kesby wrote:
See VATSC57600 (excess charge not consideration, but a payment for breach of contract), contrasted with the Vehicle Control Services decision (where the charge was considered to be contractual).

OK Steve. I think guidance in VATSC57600 is incorrect, but I'm not going to be able to change it! Thanks for reducing my area of ignorance by a small amount.

Cheers, Neil

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