Company Car Tax Mistake? HMRC or Employer.

stuartbrookes

All,

I'm hoping there is some 'Accountant' type of person here or someone who understands Company Car Tax far better than I do.

I'm a higher rate tax payer, I also receive a £525pcm BIK towards a Company Car, which is done with a lease company.

I've had my vehicle since August 2008, I received a shock in my pay-packet this month which is about £240 less than I expected. My employer told me to speak to HMRC who have said.

- In financial year 09/10, they received no information on any BIK I received and thus I paid zero tax on my Company Car Allowance for that year, £6,300pa.
- In financial year 10/11, they received no information on any BIK I recieved and thus I have paid zero tax up to Dec 2010 on my Company Car Allowance that I receive, £6,300.

They have changed my tax-code to K12, which I don't really understand, it was previously 506L.

They have told me they are entitled to 40% of all my BIK payments from 09/10 (£2,520) and 10/11 (£1,890). They did admit I can challenge 09/10 as they didn't notice it in the financial year. They plan to start taking the 10/11 outstanding amount as of April 2011 over the 11/12 financial year.

My question is this... I thought Company Car Tax was based on the car, not on the amonut recieved. Thus, if I use the Parker Company Car Tax, the 40% rate for my vehicle is only £170, they want 40% of £525 (which is £210).

On top of this, who ultimately takes responsibility. I don't submit any self-assessment as I have no other income bar my employers who obviously does my PAYE etc. Is this my responsibility, is this my employers responsibility? Is there any comeback for me on HMRC?

In total, I'm now c£250 a month worse off, as of April that will be another £157 when they start claiming the outstanding 10/11 payments. On top of that, I have a potential £2.5k bill from the 09/10 year.

What is worse, is that I had the car since August 08, so it seems as though my tax was screwed up a year or so into my lease. I can barely afford the £250, let alone the additional amount in April or the lump sum they're trying to sting me for.

Is there anything I can do about this?

Googlewhacker

you are responsible I am afraid, I had the same happen to me after 18 months of not paying tax due to my company cocking it up and then it took another 18 months to correct itself!

stuartbrookes

I find that ridiculous. They are there to process salary, check deductions, PAYE etc... In which case, if I'm meant to double check everything, they might as well forget it and I'll do a self-assessment instead.

Were you liable for the previous financial year as well? Even the HMRC guy, who was amazingly very sympathetic, said I may be able to challenge that.

stuartbrookes

One more question, this is the really confusing piece.

Is there two lots of tax for a company car, as per my two items below?
1) The tax from the amount my company give me, ie, for me its 40% of the £525pcm I've given
2) The tax based on the P11D of the vehicle I chose based on price, CO2 etc etc.

sallyanny

Hmm, it depends on how it's done. If your employers just give you £525 per month, which you then use to pay a car lease which you've taken out yourself in your own name, then it isn't really a 'company car' at all. In this case, you would be due to pay 40% tax on the £525 per month (but your employers should really have taxed you on it already, through PAYE).

If the lease is taken out in the company name, with payments, insurance etc arranged by your employer, then it is a company car and you should be taxed according to the list price of the car and the emissions.

Your employer would have had until 6th July 2010 to report your benefits in kind for the 09/10 tax year.

Hope that helps.

Googlewhacker

stuartbrookes wrote: »

I find that ridiculous. They are there to process salary, check deductions, PAYE etc... In which case, if I'm meant to double check everything, they might as well forget it and I'll do a self-assessment instead.

Were you liable for the previous financial year as well? Even the HMRC guy, who was amazingly very sympathetic, said I may be able to challenge that.

Unfortuntaley yes, I didn't kick up that much of a fuss though so you may be lucky

hcb42

It's your responsibility. Happens a lot though with cars! You should be getting a P11D from your employer if you have benefits like a car/medical etc. If you are then not getting a Self Assessment, not sure, might be going to wrong house or something, but if the company are providing you with the lease car (i.e. not doing as prev poster said and giving you £525 to sort yourself out with your own car) then you will need to pay the back tax. Not worth fighting the revenue man. If your code isnt changed shortly after getting a new big taxable benefit such as a car, then it is a red flag to do someinthg about it, as you are still liable for tax whether deducted or not.

If you are just receiving £525 and you have to go out and source your own car, and pay for it etc, then that is taxed under your normal tax at appropriate tax rate, as prev poster also said.

asc99c

The Parkers calculation will be based on the case where you are just handed a car, rather than £525/month. You aren't forced to spend £525/month on a car - essentially it is just cash you're given. One of the guys I work with has a similar sum but drives an ancient 14 year old car that would be paid for with one month's payment. The cash just goes into his bank account.

donquine

stuartbrookes wrote: »

I'm a higher rate tax payer, I also receive a £525pcm BIK towards a Company Car, which is done with a lease company.

Is the £525pcm your taxable benefit, or is this just a sum of money you can offet in full or in part against a car? What happens if you go for a car that costs less than that? Who keeps the difference?

stuartbrookes wrote: »

- In financial year 09/10, they received no information on any BIK I received and thus I paid zero tax on my Company Car Allowance for that year, £6,300pa.
- In financial year 10/11, they received no information on any BIK I recieved and thus I have paid zero tax up to Dec 2010 on my Company Car Allowance that I receive, £6,300.

Although you would hope for your employer to get this right on your behalf, in the eyes of the law, the onus falls on you to make sure it's correct. As a layperson, it may not seem fair, but that's the truth of the matter and HMRC will reject any kind of appeal based on ignorance of tax legislation.

stuartbrookes wrote: »

They have changed my tax-code to K12, which I don't really understand, it was previously 506L.

Most people are entitled to a personal allowance, on which no tax is paid. For this tax year just about to end, the basic amount was £6,475. You were previously getting a personal allowance of less than that, i.e. £5060. You would have received a notice of coding from HMRC saying as much, but without an explanation as to why. It would have been your responsibility to look at your annual income (all sources, not just your main job) and your taxable benefits to work out whether or not that was correct.

You're now on a K code, which basically means rather than HMRC saying they won't tax £5,060 of your income, they'll tax the whole lot plus you owe them some money and they will tax an extra £120. The fact you're on a K code makes sense, given what you're saying, but you now need to check the amount is right.

stuartbrookes wrote: »

They have told me they are entitled to 40% of all my BIK payments from 09/10 (£2,520) and 10/11 (£1,890). They did admit I can challenge 09/10 as they didn't notice it in the financial year. They plan to start taking the 10/11 outstanding amount as of April 2011 over the 11/12 financial year.

My question is this... I thought Company Car Tax was based on the car, not on the amonut recieved. Thus, if I use the Parker Company Car Tax, the 40% rate for my vehicle is only £170, they want 40% of £525 (which is £210).

I'm not sure I understand from your post what the taxable benefit of your car is and whether your employer pays this for you, or you just get an extra £525 in your pay packet each month to spend on a car or as you see fit.

stuartbrookes wrote: »

On top of this, who ultimately takes responsibility. I don't submit any self-assessment as I have no other income bar my employers who obviously does my PAYE etc. Is this my responsibility, is this my employers responsibility? Is there any comeback for me on HMRC?

As mentioned above, sadly the buck stops with you. I guess the assumption is, if you have more complex tax affairs, you probably have more money and as such, can afford an accountant or are intelligent enough to figure out your tax affairs yourself.

stuartbrookes wrote: »

In total, I'm now c£250 a month worse off, as of April that will be another £157 when they start claiming the outstanding 10/11 payments. On top of that, I have a potential £2.5k bill from the 09/10 year.

What is worse, is that I had the car since August 08, so it seems as though my tax was screwed up a year or so into my lease. I can barely afford the £250, let alone the additional amount in April or the lump sum they're trying to sting me for.

Is there anything I can do about this?

Firstly, you need to work out whether HMRC's calculations are correct. They don't get things right 100% of the time.

If HMRC are recovering all the tax you owe them through your tax code, as far as they're concerned, there's no hardship. There is a limit on how much tax they can recover through PAYE for the reason of not leaving you penniless each month.

If you owe them an additional amount that they are seeking to recover by means of a cheque rather than through your payslip, you could argue hardship and try to negotiate repaying over a longer period of time. They make seek to charge interest, if your request is successful.

I must admit that personal tax is not my area, but the above should give you something to go on.

stuartbrookes

Hi all, clarifying my car allowance piece.

I have an annual car allowance of £6,300 (£525pcm). I do not get 'paid' this as such, instead I select a car from a list through the lease company that my company use, and they pay them directly.

If the car I choose is £600, then I have to top it up with £75 of my own money, as I currently do. However, if the car is only £300, then I do not get the other £225, my company keep that as far as I am aware.

My P11D for the 09/10 financial year had all my benefits in kind being listed down, so it looks as though HMRC screwed up and I'll challenge that as they haven't noticed it within the same financial year. So its really trying to get my head around what I'm taxed on, whether its the £525 or the Emissions & List Price... I believe I should be being taxed on the latter, however I think I am being taxed on the former.