Car allowance offsetting against company car tax.....

ianb1200

Hi all,

Bit of a random one here but bear with me.....

I work in the public sector and receive a cash car allowance (usual agreement - taxed as if it's income). My organisation runs a scheme whereby you can get a car through the Company at a reduced lease rate which includes insurance etc. I have to pay tax on this (based on emissions) and have to make a contribution based on the value of the car. I also lose my cash allowance.  I know that I can declare the contribution I make as a capital contribution through my tax return, but can I also claim for the loss of the cash allowance as a contribution? Hope this makes sense.....

Dazed_and_C0nfused

can I also claim for the loss of the cash allowance as a contribution? 

No.

I know that I can declare the contribution I make as a capital contribution through my tax return

That sounds unusual, if it was a genuine capital contribution your employer should be using the details when completing the P11D each year.  You wouldn't be making any separate adjustment/claim on your Self Assessment return.

https://www.gov.uk/guidance/how-to-work-out-the-benefit-of-a-company-car-480-chapter-12

ianb1200

Thanks - I thought so but the contribution is so large that I can't see how it would make sense to anyone factoring in the loss of the allowance loss. I've only ever come across a normal company car scheme before - this seems very odd to lose the allowance and make a sizeable contribution..

redpete

ianb1200 said:

Thanks - I thought so but the contribution is so large that I can't see how it would make sense to anyone factoring in the loss of the allowance loss. I've only ever come across a normal company car scheme before - this seems very odd to lose the allowance and make a sizeable contribution..

Let's assume you were getting £200 a month car allowance, on which you paid tax & NI.  Now you are not paid this so you will not be paying that amount of tax & NI - so your loss of the allowance is taken into account for your tax liability.  This will be to some extent balanced by the liability from the assumed benefit of the lease arrangement.

If I suffered a cut in pay I wouldn't expect the government to compensate me for this.

ianb1200

redpete said:

ianb1200 said:

Thanks - I thought so but the contribution is so large that I can't see how it would make sense to anyone factoring in the loss of the allowance loss. I've only ever come across a normal company car scheme before - this seems very odd to lose the allowance and make a sizeable contribution..

Let's assume you were getting £200 a month car allowance, on which you paid tax & NI.  Now you are not paid this so you will not be paying that amount of tax & NI - so your loss of the allowance is taken into account for your tax liability.  This will be to some extent balanced by the liability from the assumed benefit of the lease arrangement.

If I suffered a cut in pay I wouldn't expect the government to compensate me for this.

Yes - I get that but I'm still short of the allowance (admittedly only net of tax and NI. The devil is in the detail of the "assumed benefit of the lease arrangement". I still pay tax on the benefit and pay the full lease on the car but through a Company that the business has chosen. Fuel is outside if the arrangement (ie no free fuel and business miles paid at HMRC recommended rates for Company cars). I suppose what I'm saying is that it doesn't feel like a company car benefit so why would I do it? All I'm doing is losing my allowance and paying tax on the alleged benefit.....

Grumpy_chap

Reading this thread, I seem to be mis-understanding something.

The OP appears to be saying they currently get a car allowance, not advised, so let's assume £300 per month.

They can give up the car allowance and then take a lease car instead. 
Normally, this type of scheme has cars that are available in direct exchange for the car allowance, so give up the £300 per month and receive a car type "X".
It may also be possible to receive a better car "X+" in exchange for the car allowance plus an additional payment, say an extra £50 per month.
Some schemes even offer a lower grade car "X-" in exchange for most of the car allowance, but the OP still gets the remainder, so only giving up the £250 from the £300.

What the OP appears to be describing is to give up the car allowance (£300) but then also pay for the car lease (£300).  That is double-charging and can't be correct.  Can the OP double-check with the employer what the rules of the scheme are?

ianb1200

Grumpy_chap said:

Reading this thread, I seem to be mis-understanding something.

The OP appears to be saying they currently get a car allowance, not advised, so let's assume £300 per month.

They can give up the car allowance and then take a lease car instead. 
Normally, this type of scheme has cars that are available in direct exchange for the car allowance, so give up the £300 per month and receive a car type "X".
It may also be possible to receive a better car "X+" in exchange for the car allowance plus an additional payment, say an extra £50 per month.
Some schemes even offer a lower grade car "X-" in exchange for most of the car allowance, but the OP still gets the remainder, so only giving up the £250 from the £300.

What the OP appears to be describing is to give up the car allowance (£300) but then also pay for the car lease (£300).  That is double-charging and can't be correct.  Can the OP double-check with the employer what the rules of the scheme are?

That's exactly right - there is however no available vehicle through "the scheme" that equates to the loss of the allowance and as I can get a better deal from a personal PCP plan. It just seems a bit odd and I'm wondering why anyone would take this option - that's why I thought I was missing something......

Grumpy_chap

That certainly does not seem to make any sense at all.  Could it be that there is a mis-reading / misunderstanding somewhere?

Say an employer proudly launched a salary sacrifice car scheme to all staff as a new and added benefit improving everyone's position if they choose to take part.  I can imagine a general communication along the lines of:

"Great News!  Car salary sacrifice scheme available to all employees. From your total salary of £A you can make payments before the deduction of tax and NI of only £300 per month and have a shiny new car every three years.  Here's the best bit, the payments are made before tax and NI so you make an effective saving of £50 per month compared to leasing the equivalent car on a personal basis.  Employees with an essential user's car allowance can opt to exchange their car allowance for this scheme also.  We really think this is a great way that the management have been wonderful in making things better for all the staff, and we hope you'll agree what a fantastic benefit this option is that the management have been so great to make available."

(Made up numbers for the £300 and the £50 obviously.)

However, you already have a car allowance, so you have salary £A plus £300 car allowance making £C.  If you now take the car salary sacrifice, the salary is sacrificed from the total £C, not sacrificed from £A and also lose £300 car allowance.  

ianb1200

Yep, makes no sense at all but it is what it is. The only benefit I can realistically see is that servicing, insurance, road tax, breakdowns / repairs tyres etc are included so I think that's the deal And you're about right with the £300 gross allowance....!

Grumpy_chap

ianb1200 said:

Yep, makes no sense at all but it is what it is. 

Is that information from an accurate and reliable source?

It sounds like it is either from a junior manager who simply did not know / understand, or an administrator at the salary sacrifice part of the organisation (again who did not know / understand).  

You don't say which part of the public sector you work for, but:

• There was a similar thread recently from someone in the NHS where there was a certain level of confusion on car salary sacrifice and the line manager was just flippantly giving incorrect (but first) answer to any questions.  When they got to speak to the person who actually knew, the issue all made more sense.
• One of my friends works for our local Council and has "essential car user allowance" but new employees don't.  His Line Manager does not have the car allowance so is unsupportive of any queries that arise in that regard - jealousy as far as it seems.

Is your situation possibly comparable to either of these?

ianb1200

Grumpy_chap said:

ianb1200 said:

Yep, makes no sense at all but it is what it is. 

Is that information from an accurate and reliable source?

It sounds like it is either from a junior manager who simply did not know / understand, or an administrator at the salary sacrifice part of the organisation (again who did not know / understand).  

You don't say which part of the public sector you work for, but:

• There was a similar thread recently from someone in the NHS where there was a certain level of confusion on car salary sacrifice and the line manager was just flippantly giving incorrect (but first) answer to any questions.  When they got to speak to the person who actually knew, the issue all made more sense.
• One of my friends works for our local Council and has "essential car user allowance" but new employees don't.  His Line Manager does not have the car allowance so is unsupportive of any queries that arise in that regard - jealousy as far as it seems.

Is your situation possibly comparable to either of these?

It should be accurate - the lease company sends a quote showing the employee cost per month, tax liability based on the BIK and the fuel reimbursement based on the number of business miles. Also the cost per mile if you happen to go over the mileage which you have to declare up front for the three year term......