Taxed full BIK but have car for remainder of year?

Help me understand if an employee is being unfairly taxed on BIK

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Im hopeful someone can help explain this is a very simplistic way as HMRC have not helped not can our payroll team understand this.
 

A new employee of mine has recently left a role where they received a lesser salary but with a company car, the deduction for his car was a total of £4,614. They had this car from the start of employ there )October 2022 - 31 March 2023) and again (1 April 2023 till October 18 2023) when they left the business. 

With thenew role starting (30th October 2023) we gave them a car and a higher salary, but they have subsequently been deducted £5,035 for this car wich they received on their start date 30 October 2023 and will have till the end of the financial year. 

That said there seems to be problem with their personal allowance and deductions as I've never seen this before for anyone we have taken on.
 

This should be as standard for most people £12,570, minus if I'm correct a pro-rata amount for the previous car and the new car?
 

But in actual fact the employee has been given a tax code of SK115X and thier personal allowance is now −£1,160.

This would say to me that they have added the full years BIK for both cars and not at a pro-rata rate?

Ther also now saying they have underpaid tax and their seems to be a missing  £2,921 from their personal allowance? 
 

Thr employee has spoken to HMRC who are adamant they are correct but everything tells me there are not in this case as no one we have employed has had this happen and plenty of people move jobs mid year.  

the employee is considering doing a self assessment to ensure it gets sorted but I'm sure there is an easier way?!

any help would be greatly appreciated!

Replies (11)

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By rmillaree
24th Nov 2023 13:45

there can be time lag here

if tax code change is not done the saem time the car is fisrt provided vatchup will be needed. Often the catchup is added to the later code so they pay benefit charge plus catchup for earlier benefit charge at the same time - this can result in K codes.

Its nightmare to work out how that will pan out - all you can do is project for ful year see how ye totasl may come out and then see if reasonable

it all comes out in the wash at the year end with hmrc sending out adjusting calc if needs be or via sa if applicable

note the flip side here is when car stops being benefit - employee can ring up immeidately tell em beenfit has stopped and code will come down - with possible backdating adj to catch up as above.

i may be talking nonsense

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By FactChecker
24th Nov 2023 14:00

Does the tax code notice (showing tax code of SK115X) received by employee not show the breakdown of how HMRC arrived at that figure?
These can sometimes be less than clear, but at least provide a starting point for any ongoing discussion.

As rmillaree hints ... there may be elements still being 'clawed back' from the previous tax year (particularly if that employer reported BiKs via P11Ds instead of via RTI) - and there are almost certainly some elements that have nothing to do with any of the cars. Until you find out the items used by HMRC to work out the tax code, it's a bit like trying to work out what's "wrong" with your food shopping bill based purely on the total (i.e. without knowledge of what's been bought).

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Replying to FactChecker:
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By FactChecker
24th Nov 2023 14:07

BTW has the employee tried entering 'update-company-car-details' in Google and going to the GOV.UK page listed for checking/notifying HMRC about any changes to 'their' car since 6 April?

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By More unearned luck
24th Nov 2023 15:13

The 'X' in the code is an instruction to the employer to apply PAYE as if each pay period was the first such period of the tax year. This basis is usually known as the month 1/week 1 basis. Therefore, if the employee is paid per mensem the employee is being taxed on 1/12th of the annual benefit. For example if the BIK is £12,000 for a full year and the employee starts in October and is due no PA a code of K1200X or SK1200X would cause PAYE to be applied to £1,000 over and above that on the salary each month. By the end of the year PAYE would have been applied to £6,000 more than the cash pay which is the time apportioned benefit. The alternative of a code of K600 would cause an uneven collection of the tax on the benefit.

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Replying to More unearned luck:
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By RetiredTax
24th Nov 2023 17:43

+1

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Replying to More unearned luck:
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By RetiredTax
24th Nov 2023 17:43

+1

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Replying to More unearned luck:
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By bendybod
30th Nov 2023 11:19

Plus, it would seem that the employee was unfortunate enough (from a tax point of view) to be provided with two different company cars in one tax month. If HMRC have issued a code purely on that basis then it is going to create a pretty wacky code. One would hope that a new one may be generated when HMRC are made aware that the previous car is no longer being made available.

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RLI
By lionofludesch
25th Nov 2023 13:13

Are we to take it that these "deductions" are the respective correct full-year benefits for the cars?

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By The Rogue
30th Nov 2023 11:21

I have always thought that an employee's tax code is between them and HMR&C. The employer is not responsible for its correctness but is responsible for doing what they are told and applying it.

As payroll manager I do have staff come to me with questions and I can show them what has been reported to HMR&C and what impact it should have but I always stress that I am not giving professional advice and I can't talk to HMR&C - they wouldn't let me anyway.

One of the (many) downsides to RTI in my experience is that if changes are not reported in chronological order errors arise. A taxpayer moving employment could be reported as having started the new job before the report about leaving the old job comes through so HMR&C think they have two jobs and issue a tax code accordingly. And if company cars are involved then the errors are even worse.

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Replying to The Rogue:
Pile of Stones
By Beach Accountancy
30th Nov 2023 20:42

Yep, just had that with weekly payroll & TUPE - we filed the first FPS for new co before oldco had filed the P45's / last FPS.

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Replying to Beach Accountancy:
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By FactChecker
30th Nov 2023 21:06

Not a particularly unusual scenario.

And yet it is one of those 'rare' situations in which HMRC demonstrates an unusual ability (for them) to be absolutely consistent - in generating the wrong net result!

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