Company Car Fuel Allowance Double Whammy!!

numbers

I have a company car and when I originally received it I was given the following choices with regards to fuel for the vehicle.

a) Take a £100 a month mileage/fuel allowance to cover any business mileage and claim nothing more with the allowance being taxed at source at 40% = £720 net received per annum.

b) Receive a fuel card and pay the £1,284 per annum via my Tax Coding.

Given that I do very little business mileage, I chose option a). A year down the line and I find that not only have I had to pay tax at 40% on the allowance, but my P11D has the Fuel as a benefit in kind at a value of £3,211. (this is correct for the vehicle)

This will mean the following for the tax year.

£1,200 received as a Mileage/Fuel Allowance.
£480 tax paid at source at 40%.
£1,284 tax paid via tax code.

The net result being £1,764 tax paid on a £1,200 mileage/fuel allowance!!!!

The company accountants claim this is correct, stating that any payment of a "fuel allowance" is deemed a benefit in kind at the relevant rate, regardless of the fact that I have already paid 40% tax on it.

As for the tax office, I cannot get a straight answer from them!

I was therefore wondering if anyone knows the rules or if anyone has any ideas if the above is correct and if there is any cold hard documentation I can refer to?

Thanks

numbers

kitty1801

I take it you are paying for all the fuel that goes into the company car and your employer pays you an extra £100 through your wages?

If so, what they pay you for fuel is already being taxed and there is no additional taxable benefit to you.

In fact, you may be able to claim tax relief from HMRC for the business miles you have covered as part of your income can be claimed tax free due to the expense you have incurred.

I would get back in touch with the payroll about this (perhaps they still think you have a fuel card?) Bear in mind, that if you did have a fuel card at any point through the year, they can still class you as having a benefit.

numbers

kitty1801 wrote: »

I take it you are paying for all the fuel that goes into the company car and your employer pays you an extra £100 through your wages?

Yes, I pay for all of the fuel that goes into the company car
I receive the £100 through my wages taxed at 40% to cover any business mileage.

kitty1801 wrote: »

If so, what they pay you for fuel is already being taxed and there is no additional taxable benefit to you.

I would agree, but the company accountants do not and they are adamant that they are right (I have presented my case twice). The problem is that I don't have access to the accountants directly and I have to deal with them via Payroll/HR.

kitty1801 wrote: »

I would get back in touch with the payroll about this (perhaps they still think you have a fuel card?) Bear in mind, that if you did have a fuel card at any point through the year, they can still class you as having a benefit.

Payroll/HR know the facts (I have never had a fuel card) and they agree with me 100% that paying 40% at source should be the end of it. What I have done however is request the source of the accountants information.

Thanks

numbers

kitty1801

Sounds like you have payroll/HR are on your side then. Make sure you get a revised P11D (or a letter from them stating there was no benefit 07-08 for fuel) and they should send this on to the tax office.

If your code gets adjusted, phone your tax office straight away & ask them to take it back out - they may automatically update your code based on the incorrect P11D figures.

numbers

kitty1801 wrote: »

Sounds like you have payroll/HR are on your side then. Make sure you get a revised P11D (or a letter from them stating there was no benefit 07-08 for fuel) and they should send this on to the tax office.

If your code gets adjusted, phone your tax office straight away & ask them to take it back out - they may automatically update your code based on the incorrect P11D figures.

Unfortunately Payroll/HR will not simply revise P11D's based on what they believe is right/wrong, Payroll/HR do what the accountants tell them to do. As for the Tax Office, I plan to call them to discuss tomorrow.

Thanks

numbers

kitty1801

I don't think you will get far with the tax office on this one - you really need to get your employer to submit revised details. Perhaps you should have a meeting with the accountants who have prepared the benefit details and ask them to phone HMRC in your presence? They should contact the employers helpline on 0845 7143 143 who will put them straight.

Contact the tax office yourself and they will just tell you to get your employer to submit a revised P11d.

numbers

The problem with the Tax Office and Payroll/HR is that Payroll/HR have spoken to the Tax Office twice. On the first occassion they were advised that the accountants were wrong and on the second occassion (after speaking to accountants) they were advised that the accountants were correct!

Payroll/HR will only act on the direction from accountants and I will end up at their door if I get no joy from the Tax Office.

What I was hoping for was some cold hard facts (documentation) detailing the rules and/or regulations as the wole thing hinges around the accountants belief that if you receive any form of allowance, you pay the full whack via your P11D, REGARDLESS of the fact that you have already paid tax on the allowance.

Thanks

numbers

kitty1801

What your employer is paying you is additional pay. This is already taxed through your wages so there is no associated benefit. A benefit is something that your employer provides you with that is not/cannot be taxed at source.

It's a bit difficult to find something stating this as it very basic information, however, http://www.hmrc.gov.uk/paye/exb-intro-basics.htm might be able to help.

kitty1801

Hi

This is to do with class 1 NIC's and not tax. However, if they are putting the £100/month through the payroll, it is effectively just an additional payment on top of your salary, it is having tax & NIC deducted from it.

In other words, your income could be £12,000 but they are actual paying you £13,200pa. You really need to consider this payment as a bonus paid through your wage or some other kind of additional payment. That is how your employer currently treats it so it is not a benefit, just an additional taxed payment on top of your normal salary.

jimmo

As Kitty says the instructions you linked to are about NIC, not tax but, in reality the same rules apply to both Tax and NIC.
This is the Income Tax equivalent:
http://www.hmrc.gov.uk/manuals/eimanual/EIM05100.htm

Whilst I hope that helps you in understanding your situation I am afraid that the bottom line is still that you need to persuade whoever submitted the P11D has got it wrong.
If you have got your history absolutely correct I am afraid that the accountants are demonstrating mind boggling incompetence by completing the P11D.
Qualified accountants really don’t make such blunders very often, if ever.
So, please check your facts again bearing in mind that if you actually had the fuel card even for a very short time and maybe only used it once then you are chargeable for at least some proportion of the annual fuel benefit.
Take a look here http://www.hmrc.gov.uk/manuals/eimanual/EIM23764.htm
If you can’t persuade the accountants or your employer to amend the P11D you will still be in the same situation that HMRC are going to act on the information in the P11D first.