Payroll insight
the asset, or of actual use of the asset, will depend on the facts of each case. As a broad rule of thumb, if the asset is used solely or largely for private use by a director or senior employee and the asset is at that person’s disposal most or all of the time a charge based on availability is reasonable. If the asset has a more mixed use, to include use by the employer and/ or other employees, it may be fairer to calculate the benefit based on actual use. There are no hard and fast rules and the legislation allows for either approach, regardless of the facts.” In practice the calculation has always been on the total costs to avoid keeping comprehensive records of use. However, there is an opportunity to reduce the amount of the benefit under the legislation where the car is not available to the officer or on actual use. The amount of the benefit can be reduced by the ‘business’ element as the officer uses the car for both ‘business’ and private use. This is accomplished by treating the value of the benefit as if it were expenditure so that the business proportion can qualify for deduction under
section 336 ITEPA. The technically correct way of dealing with the benefit and the ‘business element’ reduction is for the full amount of the benefit to be shown in the P11D return, after deducting any lack of availability, actual use or employee contribution, and for individual officers to write to HMRC with their claim for a ‘business element’ reduction. The writer has first hand experience of this with a fire service client. It was a disaster. Because ...will mean that officers will see an increase in their taxable benefits in their tax codes... HMRC don’t have local offices, the letters went all over the country and the officers had different responses or, in some cases, no response at all. HMRC then accepted that the ‘business element’ could be deducted from the P11D amount, so that the correct taxable
benefit was shown and the ‘business element’ – which was still liable to Class 1A NICs – could be adjusted in the form P11D(b) which is how Class 1A NICs are dealt with. This is the accepted method that HMRC now want to change. At a recent police forum there was a discussion about the way that the benefit should be calculated; Sally Burton, the sector coordinator for police and fire, agreed to look at this and advise on the correct method. However, at a recent fire finance meeting one of her team said that all police and fire would now have to use the statutory method outlined above. This will mean that officers will see an increase in their taxable benefits in their tax codes because the ‘business element’ won’t be in the P11D, together with time and effort wasted in contacting the HMRC helpline to get codes changed and making a business element claim that doesn’t sit in a ‘pending’ pile somewhere. The writer has written to Sally Burton pointing out the waste of time and effort this will cause, for no additional tax, and it is suggested that emergency services do the same. n
This focused course represents the single best opportunity to be briefed and updated on changes One day Payroll and HR legislation update
This course covers: l Income tax and National Insurance l Real time information l Statutory payments and leave l Expenses and benefits l Pensions reform l Changes to employment rights
Book online at cipp.org.uk or email info@cipp.org.uk for more information.
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| Professional in Payroll, Pensions and Reward |
Issue 31 | June 2017
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