Employee parking P11D

Deneb

Mrs D has worked for the NHS for many years. Several years ago the hospital where she works handed over management of their car parks to a private contractor. Since that time, she has been required to pay for a staff permit which allows her to park in a staff parking area. The payment for this permit is taken from her pay before tax as monthly instalments, so presumably a salary sacrifice arrangement.

The permit does not guarantee her a parking space, it only allows her to park in a specific area without having to pay the normal parking charges if a space is available, which is not always the case.

A few weeks ago her employer sent her a P11D showing the charge for her permit as a benefit received of £71 for the last tax year 2018-19. She has now received a notification from HMRC of an adjustment to her tax code, which has been reduced by £70.

Is this correct, as she has previously neither received a P11D or been taxed on the cost of her parking permit in the entire time that she has been paying for it, which must be more than 10 years.

Dazed_and_confused

To put it into context what rate of tax is she likely to be paying?

Not liable to tax on earnings
19%
20%
21%
40%
41%
45%
46%

Deneb

She is taxed at basic rate, annual gross income circa 20K split between NHS pension, NHS part-time employment and additional work for an NHS contractor which is variable and irregular. Her tax codes are split between the three sources of income and were 852L, 330T and BR from 6th April 2019 respectively.

The code allocated to her pension has been changed to 845L from this week because "we have been notified that you now get other items worth £71".

Her tax free allowance is now £11,761 made up of the personal allowance plus work expenses, minus deductions for tax owing from the previous year and now also the £71 value of the deduction from her gross NHS employment pay for the 2018-19 tax year, which is the amount she has to pay the trust for her parking permit.

This has been the case for the last 4 years. Prior to that she worked full-time for the same NHS Trust that now forms her main part-time employment, with no pension or additional work for another employer. She has been paying the NHS Trust for a parking permit by deduction from gross pay for at least 10 years.

Dazed_and_confused

So it's costing her an extra £14.

It sounds like it may be wrong and it is her employer she will need to take it up with, HMRC are just reacting to the information the employer sent them.

There is some information here however one risk with asking questions is that it could be something needs correcting for previous tax years. Or the P11D is wrong and she'll save paying a bit of unnecessary tax.

https://www.gov.uk/expenses-and-benefits-car-parking-charges

Deneb

Yes, we're not intending to query it directly due to the amount involved and the fact that she will be retiring fully within the next 6-9 months anyway.

It just seems odd to me that a tax liability is being imposed on the value of a reduction in salary and particularly where it has never occurred previously and nothing has materially changed from her perspective. I'm just trying (and failing) to understand it :huh:

I think I will suggest that she asks some of her colleagues if they have received similar notifications.

lisyloo

There were changes made to salary sacrifice.

https://insights.leaseplan.co.uk/fleet-management/employee-rewards/salary-sacrifice-2019/

Deneb

Found the explanation. From April 2017 all salary sacrifice arrangements except for four specific exceptions are subject to income tax on the higher of the amount of salary sacrificed or the taxable benefit value.

For people already in a scheme prior to that date, and which is continuing, the arrangement was exempted from tax under a transitional arrangement until April 2018.

So the 2018-19 tax year was the first under Mrs D's continuing arrangement which became liable for income tax on the cost of her parking permit.

https://www.hazlewoods.co.uk/news/Salary-sacrifice-changes-for-some-benefits.aspx

https://www.att.org.uk/employers/welcome-employer-focus/end-transitional-arrangements-some-salary-sacrifice-flexible

It occurred to me that it would be far simpler going forward to simply deduct the cost of the permit from taxable pay, rather then continuing to treat it as a salary sacrifice arrangement, but salary sacrifice continues to be exempt from NICs, so still a small benefit to be obtained.