Company car tax/tax code help

nicki_2

My partner has not long left a job with a company where he had access to a company car. This was not declared to the tax man by the company accountant until almost the end of partners employment. As a result, we've been slammed with a tax underpayment of about £333 which has in turn changed the tax code to a K apparently.

His personal allowance was £4745 and then there was a car benefit (new rules) of £4951 giving " Your excess deductions for the year are -£206."

My question is - what does this mean now that partner has changed jobs and lost the company car? Should his tax code be re-evaluated or not? Should all this be done automatically upon change of jobs or do we have to do something ourselves?

HELP !!!!

Unbelievable_2

You should contact your Tax Office and tell them that you no longer have the car - they will amend his tax code.

sarahlouise210

the first advice that the tax office will change your partneres code is slightly misleading-they will amedn the tax code but only by apportioning the company car for the period he had it-they will not remove the deduction as he did have the car during this tax year-the code will be reduced because he does not have the car from now until April. Because of the change in code the underpayment will also be reduced. the underpayment will be collected in instalments through your partners code in instalments starting in April 2005.Unfortunately it was your partners responsibility to notify the tax office that he had a company car.

MarkyMarkD

It wasn't his responsibility - the employer is requiring to notify the Inland Revenue when they give someone a company car.

But whoever's responsibility it was, doesn't affect his liability to pay up now.

sarahlouise210

Sorry MarkyMarkD but it was nicki`s partners responsibility to tell the tax office that he had a company car-you are right the employer does have to notify the Inland Revenue but there is no time scale and often they do not do so until after April-Nicki you can contact your tax office by phone as they make notes of all calls and who took them-letters can in fact be mislaid easier than a note of call-most tax offices have call centres now and you can find the number on any correspondence from them or the phone book unfortunately the stance the tax office take is that your partner knew he had a company car and that his tax code had not changed-it is always in your best financial interest to tell the tax office of any changes as soon as possible good luck :-*

Unbelievable_2

the first advice that the tax office will change your partneres code is slightly misleading

Hey sarahlouise - I think that's a bit harsh! :'( nicki (or nicki's partner) should contact the tax office and the tax code will be changed - I didn't say their bill would be cancelled or that they'd get a huge refund or that pig's will fly etc.

sarahlouise210

sorry unbelievable... but the fact is that his tax code has changed because he has had the company car - the car deduction was not already in his tax code and therefore needs to be adjusted because he no longer has it - the new tax code is the first one that includes the car and that will have been apportioned to take into account the actual time he had the car - the underpayment quoted is the estimated underpayment that he will owe by April 2005 when the tax year ends - the actual underpayment will be reviewed after April. The tax code cannot be amended as for this tax year he did have a company car and the way PAYE works any charge for it will be made over 12 months April to April even if the car was only held for part year. I know you did not say pigs might fly ,I did not mean to appear harsh and sorry if I upset you, however I have only stated the facts based on the original information. :-*

MarkyMarkD

Sorry MarkyMarkD but it was nicki`s partners responsibility to tell the tax office that he had a company car-you are right the employer does have to notify the Inland Revenue but there is no time scale and often they do not do so until after April

Make your mind up - either I'm right or I'm wrong. In fact I'm right and there are timescales for the employer to do this. From the Inland Revenue's website at http://www.inlandrevenue.gov.uk/pdfs/ir172.htm:

What information do I have to provide to the Inland Revenue?

To help us to get your employees' tax codes right, you must send us a quarterly return form P46 (Car) as at 5 July, 5 October, 5 January and 5 April, showing employees who are

first provided with a car
provided with a change of car
provided with an additional car
already provided with a car who start to earn £8,500 or more or become a director
no longer provided with a car.
The form P46 (Car) also asks you for information about

the car's CO2 emissions, and
the type of fuel or power used to propel the car.
You must also complete and send us, by 6 July following the end of the tax year, a form P11D showing details of all expenses payments and benefits provided for each employee. You must give a copy of the information to the employee by the same date.

So nobody should have a company car, which they aren't paying tax on, for much more than 4 months which isn't going to lead to an unexpected taxable benefit of £4,951 in that tax year.

If you no longer receive a benefit which is included in your tax code, I would phone your Inland Revenue office and they will adjust your tax code straight away. Problem solved. And you can repay the underpayment over the following tax year which is scarcely harsh.

sarahlouise210

ok.. perhaps I could heave worded that a little better. The employer does have a responsibility to tell the Inland Revenue and as you said 4 monthly is the I.R. requirement, however this is not always adhered to and any resulting underpayment is always the responsibility of the individual (unless there is extreme employer negligence) The Inland Revenue always take the stance that it is your responsibility to notify of any changes to your tax affairs even if you feel the employer will notify for you. It is financially beneficial to do so to avoid the shock of tax underpaid. If you have a company car and are not paying increased tax then it stands to reason the tax code has not changed. I had said in one of my previous replies that the code could be amended to apportion the company car deduction for the time he had it and had explained this would reduce the underpayment to be collected next year. Even though the deduction for car benefit will be reduced it will not be removed until April 2005 when the new year starts. A benefit can only be totally removed from a tax code if the benefit ceased in the previous tax year. everone is right.. the code can be changed, but it often causes confusion why the code changes but the car still remains in the code and I was just trying to clarify that point. :-/ :-[ :'(

MarkyMarkD

That's sorted that out then :-)