BIK/ P9D problem

Monsoon

I did a P9D calculation back in June and worked out the overall earnings and BIKs in total didn't add up to more than £8,500 and therefore no P9D was due.

The employee's accountant is now doing his 2009-10 SA100 and is saying they are surprised at this and were expecting a P9D. They are very insistent that they need one and are not taking my word for it that one was not required.

As I don't do BIK calculations that much - and as this was an odd one in that the employee left in the year and therefore the BIK (car) was withdrawn in the year - I'm now concerned that I've done it wrong.

I'm sure I did:

Earnings in 2009/10 grossed up to 12 months plus BIK for the amount of time it was available until the car was sold = <£8,500

I'm now wondering whether it should have been salary grossed up PLUS BIK grossed up - but I think they were always going to sell the car in July (then employee left in June) and not replace it, which is possibly why I used the first method.

I used the HMRC website's calculator to work it all out and it said no P9D was due.

Can anyone shed any light?

Thanks.

qwerty

Form P9D should have been completed and handed to the employee.

You would usually issue Form P11D, unless the employee's earnings are less then £8,500, when you should issue Form P9D instead of P11D.

This is explained on Form P9D (http://www.hmrc.gov.uk/forms/p9d.pdf) in the top right hand corner.

Monsoon

Thanks qwerty. My understanding was that if the total of the benefits and salary come under £8500 then no BIK arises and P9D is not required.

I'm so confused with this one.

qwerty

If earnings are under £8,500 then no P11D is required. However, a P9D is due instead.

payrollpro

Hi Monsoon,

The answer is, it depends!

The strict technical rule is that a P9d is due if the employee's BIK's plus earnings at a rate equal to £8,500 or less, otherwise a P11D is due. If there is any BIK at all then one of the forms must be issued, it just depends which one. This is allowing for the implications of concessions, dispensations, PSA's etc and the limitation of BIK's which can be reported on a P9D.

At the rate of means someone working part time and earning £8,000 a year is a potential P9D case whereas someone taken on at £16k a year but joins on 1 October is a P11D even though the earnings will only be £8k by the end of March.

A company car, remember, is not a BIK for the purposes of a P9D, there is nowhere to put it is there? There is an argument that the benefit should be grossed up but this is incorrect. So if a car is all there was and the grossed up earnings plus the BIK value does come to less than £8,500 then you are correct, no form should be issued.

I would look again at the calculation of earnings because if someone who starts on 1 October, is paid £8k and is deemed to be earning at a rate of £16K then it follows that your man is also earning at a rate in excess of £8,500.

Payrollpro

Monsoon

Thank you for the answers.

Payrollpro, thank you! From what you've said, I think I was right.

In 2009-10 over 3 months (left in June 2009) he was paid £900. This grosses up to £3600 per annum, definitely under the threshold.

The only BIK was the car. Over the period in that year when the car was available, the BIK value of the benefit was under £4900, therefore total earnings plus BIK was under £8500, therefore no P9D.

I do these so very rarely that I'm always very careful and double check when I calculate them, as I know my day-to-day knowledge of these things isn't sufficient to rely on.

From what I've said, do you think I've done it right? Many thanks indeed for the assistance.

I really can't stand not being good at things!

payrollpro

I have to say I agree with you, no P9D because it is not relevant for that form, only the P11D. I'm not sure why but "them's the rules" so I think it is safe to drop it. The only change they made to the BIK rules was to introduce the "connected persons" requirements because a lot of business owners were allocating a car to their offspring and because the child was paid only a token sum it escaped the BIK system.

The connected persons rule changed that and meant the car, or anything else, was taxable on the business owning parent instead. Perhaps its worth checking that there isn't a situation like that with your client as it is odd to pay someone only £3,600 a year and give them a company car.

Remember, it is not possible to know everything, that's why we spend time on these forums so that the stuff people don't know can be dealt with, though some of the questions you see posted make you very worried about the practices some people run.

Payrollpro

Monsoon

Hi

Thanks PP, I really (really!) appreciate your help on this one. Like you say, we can't all know everything so these forums can be invaluable at times. Like you I worry about some questions that you see posted though! I'd like to think this one is non-standard enough to warrant no raised eyebrows

The connected persons rule might indeed be something of note here. The employee is the son of the business owner - but it was a legitimate job paying a reasonable wage, it was just the hours were reduced as the employment ended. That's why someone with a part time job was arguably being given a company car (but there was a lot of driving involved). Historically they did fall into the P11D category. The business owner's accountant is a third firm, so that would be an issue for them and not me (we just do bk and payroll) or the son's accountant.

I've actually just had the employee's accountant on the phone who's agreed with me that we can leave it as-is unless either of us later discovers anything to the contrary.

Thanks PP!

Tax - it doesn't have to be taxing. Honest!!!!! :-D

Monsoon

Just coming back to this one, I'm still in discussions, and I've been pointed to this manual
http://www.hmrc.gov.uk/manuals/eimanual/eim20101.htm

The BIK is restricted because it was only available for part of the year, but then the formula in step 3 seems to suggest that you DO gross up the BIK charge again, which would result in annual earnings over £8500 in my case, and therefore a P11D.

If anyone has any further thoughts I'd be grateful

Monsoon

For the benefit of the thread:

Just called the AAT MIP helpline for this, and they confirm that car benefit does need grossing up when working out if an employee earns at a rate of £8500 or more, which corresponds to the advice in EIM20101.

Ergo, I didn't get it right. You live and learn.

Thanks for all the help anyway folks