Company car

I had a quick Google on this but couldn't find what I wanted; it is a pretty obscure technicality... is it possible to 'make good' the cost of a company car for P11d purposes? And, if so, does the individual need to make good the actual cost (i.e. lease payments) or the P11d value (i.e. list price x appropriate percentage)?

Comments

  • Monsoon
    Monsoon FMAAT, AAT Licensed Accountant Posts: 4,071 ? ? ?
    I have a feeling the answer is no - company car is taxable even if the employee contributes.

    I say this because I remember a thread on AWeb where someone mentioned that if a car lease is in the company's name, even if the payments are coded to the director's DLA, it's still a taxable BIK of some kind. I don't know the legal basis for this though, sorry.
  • deanshepherd
    deanshepherd Registered Posts: 1,809
    You can actually do both.

    You can make a capital contribution (up to £5k I believe) which will reduce the cars list price for calculation purposes or you can make a payment for private use which directly reduces the benefit. Obviously it would be much better to opt for the latter.

    Useful link here for running the numbers.
  • Dean
    Dean Registered Posts: 646
    Monsoon wrote: »
    I have a feeling the answer is no - company car is taxable even if the employee contributes.

    This applies to the fuel benefit.

    If contributions are made then it's ALWAYS ( ;) ) in relation to the "Capital contribution" to the car as deanshepherd refers.

    Regards

    Dean
  • Dean
    Dean Registered Posts: 646

    You can make a capital contribution (up to £5k I believe)

    Yup - here

    Regards

    Dean
  • Monsoon
    Monsoon FMAAT, AAT Licensed Accountant Posts: 4,071 ? ? ?
    Thanks Deans :D
  • jamesm96
    jamesm96 Registered Posts: 523
    Thanks chaps!
  • NeilH
    NeilH Registered Posts: 553
    Dean wrote: »
    If contributions are made then it's ALWAYS ( ;) ) in relation to the "Capital contribution" to the car as deanshepherd refers.

    Regards

    Dean

    Hi

    What if the employee makes a specific/calculated payment towards fuel used for private motoring?

    The "Car Fuel Benefit" paragraph at the bottom of page three of the document on the link says that if you employer provides fuel for private use, you can deduct the amount you paid for private fuel. It does say if you pay "all", however.

    Neil
  • Dean
    Dean Registered Posts: 646
    NeilH wrote: »
    Hi

    What if the employee makes a specific/calculated payment towards fuel used for private motoring?

    The "Car Fuel Benefit" paragraph at the bottom of page three of the document on the link says that if you employer provides fuel for private use, you can deduct the amount you paid for private fuel. It does say if you pay "all", however.

    Neil

    If an employer provides fuel to an employee then obviously there is a benefit.

    If the employee can show that he has reimbursed his employer in full then there is no benefit!

    However, there cannot be a 'part' contribution. You have to show that the fuel has been reimbursed to the penny or you get no allowance as you do the capital contribution. If you have made a part contribution it's money down the drain as you get taxed as if you haven't made any contributions.

    Regards

    Dean
  • NeilH
    NeilH Registered Posts: 553
    Dean wrote: »
    If an employer provides fuel to an employee then obviously there is a benefit.

    If the employee can show that he has reimbursed his employer in full then there is no benefit!

    However, there cannot be a 'part' contribution. You have to show that the fuel has been reimbursed to the penny or you get no allowance as you do the capital contribution. If you have made a part contribution it's money down the drain as you get taxed as if you haven't made any contributions.

    Regards

    Dean

    Ahh, I see!

    The reason I queried was because with my previous company the salesmen had fuel cards but we/they monitored mileage/fuel for private and business use and they reimbursed any private mileage based on actual business vs private.

    Neil
  • stevo5678
    stevo5678 Registered Posts: 325
    If you make good £0.40 a mile for all private miles done in the company car this is sufficient to withdraw the need to do a P11D. IE at this approved HMRC rate for 2010-11 the individual has paid back/made good his use so there is no private benefit to him/her.
  • jamesm96
    jamesm96 Registered Posts: 523
    stevo5678 wrote: »
    If you make good £0.40 a mile for all private miles done in the company car this is sufficient to withdraw the need to do a P11D. IE at this approved HMRC rate for 2010-11 the individual has paid back/made good his use so there is no private benefit to him/her.

    But if the P11d value is, say, £4,000 and (I know I'm taking this to the nth degree) the private mileage was, say, 10,000 miles then he'd have 'made good' £4,500 at the current 45p rate so surely that's too much of a contribution? Do you see what I mean?

    And it's the same with the lease payments, they might only come to £3,600 for the year, whilst the P11d value might be £4,600; would the employee need to make good the £3,600 or the £4,600? I assume the latter as the amount made good goes on the P11D(b) to set against the P11D benefit.
  • deanshepherd
    deanshepherd Registered Posts: 1,809
    I can't say I have ever heard of using that method before and, without looking it up, I am not sure you can.

    The car benefit is assessed on availability for private use, regardless of how much private use you actually make. It would therefore seem absurd to me to allow the benefit to disappear by stating, for example, that you only do 1,000 private miles a year and hence your swanky BMW costs you only £450.

    Typically you would work out the benefit in advance and make exactly that payment as a contribution towards private use.

    If the employer pays for all fuel then private miles need only be reimbursed at the mileage rate for the particular vehicle 12-14p perhaps.
  • Monsoon
    Monsoon FMAAT, AAT Licensed Accountant Posts: 4,071 ? ? ?
    I'm with Dean on this one.
  • jamesm96
    jamesm96 Registered Posts: 523
    Monsoon wrote: »
    I'm with Dean on this one.

    Yeah I agree. So the question just remains, to remove the P11D bill altogether for the car benefit (I'm not worried about fuel), it is the P11d value that needs to be made good rather than that actual cost of the contract hire payments?
  • andrewtdk
    andrewtdk Registered Posts: 150 ? ? ?
    I think there was a recent case on this which HMRC won which stated that the benefit has to be reimbursed and not just the lease value. If i get a chance i will try and have a look for the case but it might be worth a quick google

    Edit. It appears the case might not have been quite as recent as i thought but this is the case i was thinking about http://www.bailii.org/uk/cases/UKFTT/TC/2010/TC00409.html
  • deanshepherd
    deanshepherd Registered Posts: 1,809
    Just make sure you do not in any way document it as a capital contribution. You'd be surprised how quickly an admin oversight can lead to a big tax headache.
  • jamesm96
    jamesm96 Registered Posts: 523
    Just make sure you do not in any way document it as a capital contribution. You'd be surprised how quickly an admin oversight can lead to a big tax headache.

    Cheers! I'd put it through on the P11D software first, but that's exactly the sort of technicality that would result in me spending half an hour trying to work out why there's still a benefit! Only for me to decide it simply must be a software error, call support and, after explaining the problem to the guy at support, realising what I've done myself and having to tell him I don't need him any more!
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