COMPLIANCE
the employee for their private use can be made to reduce the figure brought forward from the previous step and can reduce the amount to nil; however: ❍ the employee must be required to make contributions for the private use, and must make the contributions either during the year or by 6 July following the tax year that is being reported ❍ the payment is a condition of the car being made available for the employee’s private use, with the agreement being in place before the car is used for private use ❍ the contribution can reduce the cash equivalent to nil, which does not however mean that there has been no cash equivalent benefits, simply that it is nil ❍ where fuel is provided for private use, there will still be a car fuel benefit charge ❍ if the contribution reduces the cash equivalent to less than nil, there is no further relief available. If this seems simple, we know from experience nothing is ever totally that simple when we consider the UK tax system. Company cars are no exception; for example, the above steps do not include an instance of shared cars (‘Step 8,’ if applicable) which may occur. Detailed guidance is available in chapter 12 of the 480 guide ( Expenses and benefits for directors and employees – a tax guide (https://bit.ly/3eIJ4tx)) and is also available in the Employment Income Manual . A calculator on GOV.UK (https://bit. ly/2VyLCTz) should help to ease the burden of company car taxation. Car fuel benefit calculation Where a company car is provided, a car fuel benefit charge will arise unless: ● fuel was only provided for business travel ● the employee was required to, and did, make good the whole cost of any private travel which would include home to work travel
...employers that retain traditional P11D reporting having the benefit of the extra time
● a mileage allowance covering the cost of fuel for business travel only was paid. If any private travel takes place, such as home to work, then a fuel charge will arise. An annual fuel multiplier, which for the 2019/20 tax year is £24,100 (£24,500 in 2020/21 tax year). This amount is multiplied by the appropriate percentage for the car. P11D(b) return The total cash equivalent of a car/cars made available during the year, together with the cash equivalent of fuel, will be subject to an amount of class 1A National Insurance contributions (NICs) at the rate of 13.8% and will be reportable via the P11D(b) return. Payrolling The calculation method remains the same for employers that have elected to payroll the value of benefits in kind. The key difference is timing of when the calculations need to be made with employers that retain traditional P11D reporting having the benefit of the extra time. We know, however, from the above-mentioned survey that many payroll professionals involved in this process begin to gather the necessary data from the beginning of the relevant tax year, regardless of how they plan to report the cash equivalent values. If payrolling is used to report data, the employer must submit the following data in the first full payment submission (FPS) of the tax year and in the first FPS following a change: ● the make and model of car ● date first registered ● CO2 emissions ● zero emissions mileage (see below) ● car identifier e.g. registration number
● calculated price ● date car was available from ● cash equivalent of the car ● date car was available to (if within the tax year) ● date free fuel was provided ● cash equivalent of fuel ● date free fuel is withdrawn (if within the tax year). In the event that the information being reported is an amendment to payrolled car data reported in an earlier FPS an amendment indicator must be used. Impact on worldwide pollution levels? Budget 2017 announced the government’s intention to change the test used to determine CO2 emissions figures. Subsequently, the Worldwide Harmonised Light Vehicles Test Procedure (WLTP) was introduced in September 2018, and now supersedes the new European driving cycle (NEDC). For cars first registered on or after 6 April 2020, employers are to use WLTP figures from the V5 documentation and ignore NEDC figures. Cars first registered between 1 October 1999 and 5 April 2020, inclusively, will continue to use the CO2 emissions figure produced by the NEDC procedure. Five new bands are to be added to the percentage ready reckoner where the car has an approved CO2 emission range, and specifically when the emission range is ‘ultra-low’ i.e. less than 75g/km. For a hybrid company car which has a CO2 figure within the range 1– 50g/km, the bands will focus on the car’s electric mileage range or zero emission mileage. Put into plain language – how far that car will travel in electric mode before the battery needs to be charged again. Tax year 2019/20 For tax year 2019/20, the appropriate percentage to be used when calculating the taxable benefit of a company car is based on its CO2 emissions. The percentage increases by one point for each 5 g/km band, to a maximum of 37%. See truncated table 1.
| Professional in Payroll, Pensions and Reward | June 2020 | Issue 61 32
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