Company Car Tax

[cris r]

hi don't know if anyone can help or shed any light on this issue we are having.
My husband started working for his present employer this time last year. during the interview it was understood that he would be office based but this did not happen. After racking up many miles on his new car he asked for a company car which they sourced for him. He knew he would loose his car allowance and would have to pay tax on this car. However after driving it for three / four months his payslip showed a tax deduction of fifteen hundred pounds in one hit. When he queued this they said that they though it a bit excessive but that the car tax had caught up with him.
Since last week when all this started and they looked into it further and it transpires that the payrole company they use have not been taxing his previous car allowance either so this will probably incur more tax. Do the company share any responsibility in this matter. My husband found out that they did not submit the P 46 until 33 days after he had the company car which did not help the matter. the company seem to be shrugging there heads saying it was an error...... move on
Many Thanks for any reply Christine

[fiction-factory]

If tax was genuinely due on the previous tax allowance then it is due, although it does seem harsh to take it all in one go. However I think a fair part of the amount taken would have related to the taxable benefit of the company car which he knew they would catch up with at some stage. It would have been fairer to take it in smaller instalments but now it's been taken I doubt they will give it back and take it over a longer period

[fiction-factory]

On reading it again maybe I misread it initially as it now sounds as if the£1500 was for the tax liability for 4 months (which seems far too high) and the further tax liability has not yet resulted in deductions so he has more to make. If so i would ask them to spread any further amounts due over a longer period- maybe via a change to his 2016/17 tax code

[cris r]

yes this is what i said to my husband thank you for the relpy

[fiction-factory]

I would also check that HMRC have only applied the taxable benefit for the company car just from the date he got it and not from the start of the tax year in April 2015 since £1500 tax seems more like what he'd pay in a year rather than in 3-4 months.

[DocHH]

I do not think there is enough information in the original post. Tax liability on Company Cars is based on their emissions and initial full list price, not the purchase price. The tax liability is also increased if fuel is provided for private use, which includes travel to and from the place of employment. The tax liability is considered to be the tax on the financial benefit of the car to its user, which is deducted from the Tax Free Allowance. So if a Car and fuel is considered to be worth £5,000.00, then tax needs to be paid on that, so the Tax Free Allowance will be reduced by £5,000.00, a reduction of Tax Code by 500. Depending on the car, the Tax code can actually end up negative, which used to be indicated by a K by the tax code. So a 100k code would mean you pay tax as if you had no Tax Free allowance, and were earning £1000.00 on top of that. I can assure you it can become punitive if you are a higher rate tax payer!

I must admit I thought a P46 was submitted if an employee did not have a P45, and as such would not relate to Company Car benefit. I think at the end of the tax year the Company should submit a form (P60) detailing income and tax and NICs deducted and a P11D to detail all Benefits in Kind, Company Car, Car fuel, telephone, Private Health care etc, at that stage it should trigger HMRC to issue a Self-Assessment form. If the wrong amount of tax has been paid HMRC will either issue a refund or a demand, depending if tax has been over or under paid. The tax payer may then be given the option of receiving or paying in a lump sum, or having the tax repaid or recouped in the next tax year via a Tax Code change. Eventually it should all come out in the wash, but there may be some peaks on the way.

For certain a Company Car is no longer the beneficial perquisite it used to be. It will be worthwhile recalculating if a Company Car is beneficial, or if a car allowance plus mileage is better, even if you provide your own car.

[fiction-factory]

Good luck. Let us know how he gets on. On the plus side, I suppose, he may have got some funds from selling his old car so can get by until this is resolved. Incidentally, I think there may be a misunderstanding here about the p46 being delayed late- I cannot think why getting a company car would lead to a p46

[Dogsbody2]

An excellent post by Doc.

P11Ds have to be issued by the employer by early July 2015 for the tax year that ended April 2015. These go to HMRC and your hubby also. This would have to have shown that he had the taxable value of the perk for the part of that tax year he had the company car. It would not have been possible normally to adjust his tax code that year, so HMRC would have either wanted him to pay it by self-assessment, or (more likely) they will collect the back-tax by code adjustment this year. HMRC will then have issued a personal allowance code for THIS financial year, in the knowledge he has the car.

What I'll bet has happened is that code has recently been issued - and it is issued to both the individual and the employer - and the employer has now implemented the code into payroll.

We are a long way though the tax year - 10 months - so there's a lot of backtrack tax to collect.

It should not really have been a surprise, once he saw the way his personal allowance had been amended downwards.

Companies do not have jurisdiction over when they implement HMRC code changes in payroll data - it hits in the next payroll run.

[fiction-factory]

But it reads to me that all this happened only recently Dogsbody-- over tehe last few months- so there would not have been a company car a in May 2015 when P11Ds were issued. If the tax charge actually relates to the old car allowance income then I'd have expected that income to go through the normal monhly PAYE system and not be part of a p11D. I'm wondering whether there is more to this casd than we see here