Car Allowance
toshi
Registered Posts: 27 Regular contributor ⭐
For the Year End return P11D - if the employee get mileage allowance for using his own car for business use and car allowance paid to him via payroll every month. Does the car allowances have to be declared on P11D??.
What would be benefit to employer for giving the employee car allowance instead of providing the employee with:001_wub: car??
What would be benefit to employer for giving the employee car allowance instead of providing the employee with:001_wub: car??
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Comments
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Toshi,
There are many arguments for and against each of your issues. With a company car there are significant costs and responsibilties but if the company requirement is for certain people to have a car, a reliable one, one that reflects the company values and will always be there to do the job then a company car is a must, however, if it is cost which is the key factor then a travel allowance wins every time.
The best thing to do is look at the P11D Working Sheet number 6, and for every person who receives a payment of any kind, remember to look for hidden payments like paying someone's car insurance for them, or arranging servicing and MOT directly, towards the use of their own car, add up all the payments received between 6 April of one year and 5 April of the next and then deduct the tax free allowance for the miles travelled between the same dates. Watch out because the dates for payments and the mileage don't actually match!
If the final result is positive then you have a profit to be reported on P11D whether the employee likes it or not! Remember to allow for additional tax free allowances like passenger payments. If there is a negative result then the employee can submit a claim for some tax back.
Simples, yes?
Payrollpro0 -
car allowance
:001_wub:thanks payroll pro
So you are saying that -if car allowance paid (which is included in part the salary - employee and employer pay NICs every month) at the year end we have pay Class 1a and employee pay any tax on profit?0 -
Sorry Toshi,
I have only just seen this and realised you needed a reply a long time ago, but, anyway here goes.
If you make a payment to someone without prior knowledge of their actual business mileage, in other words the payment is current month, then the payment is remuneration and potentially liable for income tax and NIC's each pay period. If you do this and never ask for mileage records then all of the income tax and NIC's get paid in the year and there is no requirement for a P11D. This is because you treated the payments as pay and not as a benefit in kind.
Sometimes you can get agreement not to subject the payment to income tax on the grounds that you will get the mileage records at the end of the year and do the Working sheet 6 to ascertain the taxable profit for the P11D but that cannot affect the NIC position because a payment must be assessed for NIC's at the point of payment unless there is evidence that the payment is exempt, i.e. the mileage record is there in front of you when you process the payment.
Mileage allowances are not Class 1A at any time because they are supposed to be assessed each pay period, NIC's are not a cumulative deduction. Each month employers are supposed to look at the payment made for travelling, then deduct the NIC free value which is the mileage times 40p a mile (there is no 25p a mile after 10,000 miles for NIC's, it is all relievable at 40p a mile) and the balance is Class 1. This is why if the payment is current month then you can never have NIC relief because you are paying before the mileage record is available.
It's an odd calculation to work with and intensely irritating but for us in payroll that's tough, we have to do it this way if we are to be compliant.
Payrollpro0 -
thanks - Payrollpro0
