Salary sacrifice tax under-payment

TaxingTimes

Hi all, first post!

I have had a salary sacrifice car for the last 2 years, I pay around £300 a month to lease the car plus fuel on top.

For the last 2 years it turns out that I have not been paying any benefit in kind tax because my employer failed to inform HMRC that I had the car.

I was not told at the time that the BIK payment would be collected by lowering my personal allowance tax code so I was unaware I was underpaying tax.

This has resulted in an underpayment of around £800, looking at HMRC website it appears that because my employer made the mistake of not informing HMRC then they may be liable for the underpayment?

chrisbur

TaxingTimes wrote: »

Hi all, first post!

I have had a salary sacrifice car for the last 2 years, I pay around £300 a month to lease the car plus fuel on top.

For the last 2 years it turns out that I have not been paying any benefit in kind tax because my employer failed to inform HMRC that I had the car.

I was not told at the time that the BIK payment would be collected by lowering my personal allowance tax code so I was unaware I was underpaying tax.

This has resulted in an underpayment of around £800, looking at HMRC website it appears that because my employer made the mistake of not informing HMRC then they may be liable for the underpayment?

For the employer to be liable the following is required....
"The circumstances are that your employer or pension payer did not take reasonable care to operate
PAYE and the error was not made in ‘good faith’"

Full details at http://www.hmrc.gov.uk/thelibrary/tax-paye/employer-errors-deduction-paye.pdf

jamesml

I'm not sure whether its technically right or wrong (as to whose liability it is) but at the end of the day if it were me I'd be arguing that they messed this up, not you. They administer the company car scheme, they administer the payroll, and clearly its their administrative error.

Having said that, clearly this is your debt - so it depends how that convo goes. Ultimately its clearly your liability. I'm assuming that they gave you an indication of cost when you took the car (which included BIK tax)? If so, you in theory should have noticed that you weren't getting taxed correctly - although appreciate this is not easy to understand.

Worse case I'd be asking for my employer to fund the gap and then repay to your company over the period it related to.

Debt_Free_Chick

This may not be anything to do with the salary sacrifice scheme.

When you first get a benefit in kind, your employer should declare this on a P11d (a particular tax return for this purpose). The P11d is processed at the end of the tax year. So, if you first had the car in, say May 2012, it would go on the P11d at the end of that year ie 5 April 2013. The P11d generally goes to HMRC in the following July. In this example, HMRC would not know about the BIK until you'd had the car for 15 months, so you would already be 15 months "behind" with any tax due on the BIK.

Once HMRC get the P11d, they adjust your PAYE code to take account of the tax due on the BIK - and to collect the arrears in tax.

Is this what happened in this case?

The only way to avoid this situation is for you to notificy HMRC as soon as you get the car and ask for a new PAYE code at that point in time.

zygurat789

Debt_Free_Chick wrote: »

This may not be anything to do with the salary sacrifice scheme.

When you first get a benefit in kind, your employer should declare this on a P11d (a particular tax return for this purpose). The P11d is processed at the end of the tax year. So, if you first had the car in, say May 2012, it would go on the P11d at the end of that year ie 5 April 2013. The P11d generally goes to HMRC in the following July. In this example, HMRC would not know about the BIK until you'd had the car for 15 months, so you would already be 15 months "behind" with any tax due on the BIK.

Once HMRC get the P11d, they adjust your PAYE code to take account of the tax due on the BIK - and to collect the arrears in tax.

Is this what happened in this case?

The only way to avoid this situation is for you to notificy HMRC as soon as you get the car and ask for a new PAYE code at that point in time.

Have you ever seen a P46 car:-

Use from 6 April 2013 onwards

You must complete this form if there is a change that affects car benefits for an employee earning at the rate
of £8,500 a year or more, or a director for whom a car is made available for private use. Complete and return
this form within 28 days of the end of the quarter to 5 July, 5 October, 5 January or 5 April in which the

change takes place

Debt_Free_Chick

zygurat789 wrote: »

Have you ever seen a P46 car:-

Use from 6 April 2013 onwards

You must complete this form if there is a change that affects car benefits for an employee earning at the rate

of £8,500 a year or more, or a director for whom a car is made available for private use. Complete and return
this form within 28 days of the end of the quarter to 5 July, 5 October, 5 January or 5 April in which the

change takes place

But this would only apply to any change since April 2013.

OP states that car has been provided for 2 years, so would have been treated under the previous rules.

zygurat789

Debt_Free_Chick wrote: »

But this would only apply to any change since April 2013.

OP states that car has been provided for 2 years, so would have been treated under the previous rules.

Form P46 Car has been around for lomger than that.

Shambler

Found this info for 2010

http://www.accountingweb.co.uk/anyanswers/p46-car-0

But then this...it's a bit of a minefield!...

http://www.accountingweb.co.uk/anyanswers/p46-car-0

Shambler

This appears to show that they should have submitted it by May 3rd 2012

http://www.businesslink.gov.uk/Horizontal_Services_files/TAX_deadline_calendar.pdf

TaxingTimes

Quick update.

I've now seen a copy of the P11D and under section F 'Amount employee pays for private use of the car' is has no entry.

I'm wondering if my £300 a month payment should be in this box and if so this would wipe out the BIK tax?

zygurat789

TaxingTimes wrote: »

Quick update.

I've now seen a copy of the P11D and under section F 'Amount employee pays for private use of the car' is has no entry.

I'm wondering if my £300 a month payment should be in this box and if so this would wipe out the BIK tax?

In your first post you seem to be confused between "salary sacrifice" and "paying".
You either sacrifice your salary for a car, in which case there is no entry on the P11D because you have not "paid" anything; or you "make a payment" either by cheque etc or by a deduction on your payslip, after tax has been calculated, this would appear on your P11D.