Payroll insight
Example An emergency services employee has a vehicle with a market value of £26,705. (Lease costs would be used if higher and cars were leased rather than purchased.) Total mileage is 3,576 of which 2,169 is business mileage. Running costs are £993 and the employee makes a monthly contribution of £100.
Are we there yet? Is this the end of the saga? The transitional legislation that is being introduced in the next Budget will be applied retrospectively to 6 April 2017 and will run to 5 April 2020. From 6 April 2020, the legislation originally introduced from 6 April 2017 will come into force and the vehicle calculations will lose the ability to deduct the business element and the only deduction will be for unavailable days, which is a whole new minefield. On the other hand, pressure may well cause the transitional legislation to be made permanent. We shall wait and see. In the meantime, emergency services employers should take the opportunity to consider their options before the changes come into force. ...the figures used to calculate both the tax and the Class 1A NICs will be the same
The employee’s taxable benefit is worked out as follows:
20% of market value Plus, running costs
£5,341
£993
Total costs (A)
£6,334 £3,842
Minus, reduction for business use (i.e. £6,334 × 2,169 ÷ 3,576)
Interim value of benefit
£2,492 £1,200
Minus, contribution by employee (B)
Net taxable benefit
£1,292
Class 1A National Insurance contributions (NICs) would be based on £5,134 (i.e. (A) minus (B)).
That would have been the end of this article except that late one evening at the end of April 2018, HMRC issued yet further guidance amending the way that the Class 1A NICs should be calculated. This revision will mean that the figures used to calculate
both the tax and the Class 1A NICs will be the same. Using the example, the amount chargeable to both tax and Class 1A NICs would be based on the figure of £1,292. Please note that this does not apply to any tax year before April 2017. n
Company diesel car supplement
The April edition of HM Revenue & Customs’ Employer Bulletin provides guidance on the treatment and reporting of the diesel car supplement
F rom the start of tax year 2018–19 (i.e. from 6 April 2018), the diesel supplement relating to the car benefit and the car fuel benefit charge will increase from 3% to 4% for all diesel cars that are not certified to meet the Real Driving Emissions 2 (RDE2) standard which is also known as ‘Euro 6d’. If the diesel company car is RDE2 (Euro 6d) compliant, the diesel supplement must not be applied when calculating the car benefit and car fuel benefit charge. The diesel supplement will continue to apply to cars using diesel only (not diesel hybrids) and registered on or after 1 January 1998, which do not have a
registered nitrogen oxide (NOx) emissions value. It will also apply to models registered on or after 1 January 1998, which have a registered NOx emissions value that exceeds the RDE2 (Euro 6d) standard. For the tax year beginning 6 April 2018 only: l use the appropriate percentage for ‘Fuel Type A – All other cars’ when calculating the cash equivalent for diesel company cars which are RDE2 (Euro 6d) compliant l use ‘Fuel Type A – All other cars’ when reporting diesel company cars which are RDE2 (Euro 6d) compliant in the P11D or P46Car returns.
Employers that have registered to payroll the car and car fuel benefit charge for RDE2 (Euro 6d) compliant diesel cars, should: l calculate the cash equivalent using the appropriate percentage for ‘Fuel Type A’, and l enter this amount in item 182 of the full payment submission (FPS) return, and l enter ‘A’ in item 177 in the FPS return. The certificate of conformity available from the manufacturer will confirm whether the car is RDE2 (Euro 6d) compliant. It is expected that prior to tax year 2019–20 there will not be many if any cars on the market meeting the RDE2 (Euro 6d) standard, but there may be a few. n
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| Professional in Payroll, Pensions and Reward |
Issue 41 | June 2018
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