Kate Upcraft provides some additional explanation of HMRC’s advice concerning reporting of company cars set out in Employer Bulletin issue 68.
Parts 3 of this series will cover the revised business tax accounts, RTI data and student loans.
Some good news
HMRC have conceded a point on the correct comparison of values for establishing the “amount foregone” for company cars with CO2 emissions of 76g/km or more, provided via an OpRA. The value to be reported is the higher of the amount forgone and the cash equivalent value under normal benefit in kind rules.
Only the amount forgone from salary which relates to the car and any accessories should be compared to the cash equivalent value based on the vehicle’s list price and emissions. Any amount of salary foregone that relates to additional services provided in association with the car such as; maintenance, servicing, or insurance, must be ignored when reporting on the P11D.
This could lead to a lower P11D value than had been anticipated when the OpRA changes were first announced. It is good to see this acknowledged publicly on page 2 of the Employer Bulletin.
Employee sacrifices salary of £260 per month plus £50 per month from net pay as private use contribution for a car. Only £200 is for the car as £60 is for maintenance and insurance of the vehicle.
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- Step 1: Car benefit has a cash equivalent value of £3,100 based on the tables of CO2 emissions for 2017/18 and its list price
- Step 2: Amount sacrificed: £2,400 (£200 x 12 months)
- Step 1 produces the higher value, so use £3,100, but see step 3
- Step 3: Making good for private use reduces the reportable value established from Step 1: £3,100 - £600 p.a = £,2500
Not such good news
In terms of reporting car data ahead of the P11D season in June/July 2018, there is a problem that isn’t acknowledged in the Employer Bulletin.
Providing a form P46 (car) for use from April 2018 means the car being provided via an OpRA since April 2017 for those with no transitional protection already needs the ‘amount foregone’ versus cash equivalent value to be reported.
The hard copy version of the form P46(car) does have an 'amount foregone' section. But that form doesn’t make it clear if that amount should be an annual value, or say a monthly or weekly amount according to the employee’s pay frequency. The “contribution for private use” question does ask about the employee’s pay frequency. Equally, the hard copy form has no option to say this is a replacement car. The only choices are:
- A new car
- A second car
- A withdrawn car that is not replaced
Does HMRC assume that if you select ‘new car’, the old car was withdrawn the day before the new one was provided? What if there was a period during which no car was provided? Should you submit two P46 (car) forms, one for the withdrawal and a second for the new car?
You might ask “Why aren’t employers and tax agents using the online service to report car benefits?”. I was told by a fleet manager last week that she has not been able to use it since April 2017 as it keeps crashing, so she has had to report via the unsatisfactory hard copy postal option. Have you had a similar experience with the online P46(car) service?
The Employer Bulletin refers to a consultation on car data reporting. This is an issue that has been rumbling on for two years. When HMRC decided to establish voluntary payrolling they forgot that on the P11D there is a lot more information than just the cash equivalent value. The data includes the vehicle make, model and fuel type, which are all used by HM Treasury to inform future company car tax policy.
Belatedly HMRC realised that this data needed to be included in the FPS if the car benefit was being payrolled, not just the notional taxable value. As HMRC have failed to provide any detail as to how these new data fields in the FPS are to be populated, (eg the rules) such reporting is still voluntary for 2017/18 for those payrolling cars.
However, the reporting of car data is due to be become mandatory if you are payrolling a car benefit from April 2018. I presume the proposed consultation on car data will enlighten employers and tax agents as to the rules behind the new data fields on the FPS.
About Kate Upcraft
Kate is a technical writer, editor and lecturer on all aspects of employing people - primarily payroll and HR matters.