Tax Coding Notice/P11D Query

Horizon81

I occasionally claim mileage payments from work and each year I receive the P11D Expenses and Benefits statement from my employer. In part E (mileage allowance in excess of maximum exempt amounts), there's always a small figure like £30 to £40 depending on my mileage claims for the year.

This has never had any effect on my tax code but this year i have just received a coding notice stating that my tax code has been recalculated based on the £30 'taxable expenses payments'. How come this has suddenly occurred, when my habits have been the same for years?

jimmo

Your habits may have been the same for years, maybe HMRC's habits have changed.
It is, of course, correct for HMRC to change your coding to reflect the little bit of profit you have regularly made on your mileage payments but, going way back before computers, a human being would have looked at your P11D and made a human decision whether to alter your code or let it go because the additional tax of £6.00 a year ([EMAIL="30@20%"]30@20%[/EMAIL]) was not worth pursuit.
Nowadays the computer "makes the decision" and issues the coding notices.
Actually, as far as I know, HMRC computers don't make decisions. They follow correct procedure.
For you it appears that this is the first year HMRC have got it right.

Horizon81

Thanks for the detailed response. Maybe in these years of austerity the coalition have tightened up HMRC's practices!

thenudeone

If the mileage rate paid to you is within the HMRC limits, there should normally be nothing on the P11D.

Only if you are paid more is there any taxable benefit.

You're lucky you have a generous employer!

Horizon81

Just to update on this in case anyone else is in the same boat. I've queried it with my employer's Payroll section and they've had many calls about it. The employer claims to have done nothing different to previous years, so it looks like HMRC are indeed getting their house in order.

puddy

ive got a thread here about exactly the same thing. and years ago when i was a permanent employee with this particular employer i never had a different tax code neither did any of my colleagues and yet we all had 45p paid for petrol per mile, so we all had taxable benefits. i always thought that this was just taxed with the rest of my income, i had no idea i didnt pay tax on it?

ben.bayliss

HMRC have limits up to which your employer can reimburse you for business mileage travelled in your own car (company cars are different), without it creating a tax liability for you. It was 40p/mile (up to 10,000 miles), but recently went up to 45p/mile.

If you're paid more than that, then there will be a taxable benefit. If you're paid less then you're able to claim the extra back via a tax return.

puddy

ben.bayliss wrote: »

HMRC have limits up to which your employer can reimburse you for business mileage travelled in your own car (company cars are different), without it creating a tax liability for you. It was 40p/mile (up to 10,000 miles), but recently went up to 45p/mile.

If you're paid more than that, then there will be a taxable benefit. If you're paid less then you're able to claim the extra back via a tax return.

can i ask if that last part is the same if you invoice someone for mileage under self employed terms

so if i do a piece of work for someone as self employed, i invoice them 1000 for the piece of work and then 100 miles at 40p a mile. when i come to do my tax return, is there any relief on the 5p a mile that i didnt claim (as that employer will only agree to 40p a mile) but this is not an employer as such its someone who i have invoiced and my income is just paid as a total

jimmo

To try to clarify this when HMRC received your 2010/11 P11D there were 2 distinct processes it should follow.
1) Review your tax liability for 2010/11 taking into account the P11D information.
2) Consider whether your 2011/12 Code should be amended to take account of any anticipated liability in respect of the taxable benefits you receive.
In Horizon81's case I assume that the 2010/11 P11D showed a taxable benefit of £30 for 2010/11.
Following process 1 above, and assuming everything else is in order, Horizon81 will have underpaid his 2010/11 tax by about (30*20%) £6.00.
HMRC operates what is known as an Assessing Tolerance under which they do not bother assessing small underpayments because it is more trouble than it is worth and whilst I can't tell you what that tolerance is nowadays, it was £5.00 in the late 60s when I started working there.
So you can be absolutely confident that HMRC will not be bothered about an underpayment of £6.00 for 2010/11.
Moving on to process 2 if someone has had a taxable benefit of £30 in 2010/11 then, in the HMRC view, it is entirely reasonable to assume that the same person will have a taxable benefit of £30 plus inflation in 2011/12 and the PAYE code should be adjusted accordingly.

ben.bayliss

puddy wrote: »

can i ask if that last part is the same if you invoice someone for mileage under self employed terms

so if i do a piece of work for someone as self employed, i invoice them 1000 for the piece of work and then 100 miles at 40p a mile. when i come to do my tax return, is there any relief on the 5p a mile that i didnt claim (as that employer will only agree to 40p a mile) but this is not an employer as such its someone who i have invoiced and my income is just paid as a total

On your tax return you would show income of £1040 - the total amount that you invoiced your client. You would then claim expenses of 100 x 45p = £45, giving a taxable profit of £995.

Horizon81

Thanks for the clarification Jimmo. So when you say they lower the tax code, what does this affect? I've been told in another thread that it doesn't lower your allowance, but is it lowered to collect the underpayment from 10/11? If not then what's the point of amending tax code?