COMPLIANCE
Emergency vehicles benefits reporting
Peter Minchinton, employment taxes senior manager for PSTAX, reminds readers of the changes and some action that needs to be taken before the P11D returns are submitted in July
R eaders may recall our article on this topic published in the March 2020 issue of Professional magazine. In that article we looked at the changes coming into place from April 2020 following the end of the transitional rules which had been introduced to delay the changes in April 2017. Prior to April 2020, the ‘use of asset’ legislation allowed employees to obtain a reduction of the benefit based on the business usage of the ‘asset’, namely the vehicle fitted with blue lights. This meant they were only taxed on the private use. As of April 2020, the transitional rules ceased, and the April 2017 changes finally took effect. The new rules eliminated the opportunity for any deduction in respect of the business element of the benefit, meaning that the taxable amounts would increase and, indeed, increase significantly where officers used their cars primarily for business purposes. Although the new rules allowed a deduction for ‘unavailable days’, the guidance on how this should be interpreted appeared to show that such a deduction would only rarely apply in practice. In our aforementioned article, we listed examples of the increased benefit in kind based on actual vehicles that had been provided by one of our clients. There were some substantial increases, as illustrated in the Example.
Example The car is purchased on 31 March 2019 for £30,000. Running costs, including servicing, maintenance and insurance are £4,000 per year. Fuel is not included in the calculation as only business mileage is claimed for. The officer undertakes 25,000 miles during the year, consisting of: ● business mileage of 16,000 ● ordinary commuting mileage of 4,000 ● ‘freedom of movement’ (private use when on call) of 1,000, and ● other private mileage of 4,000. The officer pays £500 a year towards private use. The taxable benefit for tax year 2020/21 is calculated as: £30,000 × 20% = £6,000, plus £4,000, minus £500 = £9,500. The transitional rules allowed the business element (i.e. 16,000 ÷ 25,000) to be deducted, giving a net taxable benefit of £3,420 for tax year 2019/20. However, with the abolition of the transitional rules from April 2020, the business element can no longer be deducted, so the benefit for tax year 2020/21 increases by £6,080 compared to that for tax year 2019/20.
Readers should note that in the Example the cost of fuel was excluded in the benefit calculation because the officer only claimed for business miles. HM Revenue & Customs accepts that if only business miles are paid for, or the officer repays any private element, the fuel costs can be ignored. However, if there is a claim for any private mileage the whole cost of the fuel must be included in the calculation. In the Example, this would increase the amount of the benefit from £9,500 to £13,920. If any private fuel has been paid for since 5 April 2020 there is an opportunity to redress this. Where an officer makes good the cost of all fuel provided for private use by 6 July following the tax year in which
the private fuel is provided, then the whole of the fuel costs can be ignored when calculating the benefit. Unavailable days In our previous article we set out why we considered that the ‘unavailable days’ rules are unlikely to apply to any great extent to cars provided in the emergency services. This is because the legislation makes clear that, other than in circumstances where the car is simply unable to be used, an unavailable day will be one where the car has been used for business purposes but not for private purposes. On a ‘normal’ working day an officer will use the car to commute to work so, as this is a private journey, for such days the car will be classed as ‘available’ (and not ‘unavailable’). Similarly, on days when the car is not used at all, the lack of any business use will prevent the day from
...increase significantly where officers used their cars primarily for business purposes.
| Professional in Payroll, Pensions and Reward | June 2021 | Issue 71 24
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