Benefit in kind tax issue

elliemapp94

Hi  - I know a lot of people ask for all kinds of advice in the group so was wondering if anyone can give a little HR/ tax/ legal advice or point me in the right direction.

Disclaimer- I’m aware that tax is somewhat the responsibility of the employee and feel stupid that I didn’t question this with my employer sooner but here we are 🤦🏼‍♀️

I started a new job a year ago and one of the perks is a company car. When I started, I was told there were no cars available through the usual company they use to order the cars and instead I would be given a temporary hire car for a few months. It’s important to note that I was never given a choice of what type of car this would be, and was given a rather large 4x4. 

Fast forward a year, and I still have said hire car. A new manager has started and has now sorted me a permanent company car, arriving this month. He has realised that I should’ve been paying benefit in kind tax on the rented car for the past year and because certain forms weren’t filled in by the previous manager, I haven’t been. 

I’m now potentially faced with a rather large tax bill (I’m estimating £1.5k). I feel let down that these forms weren’t filled in, and somewhat that I shouldn’t be responsible but obviously I know I will be. 

Any advice? And does anyone know if I will be asked to pay this in one go or whether it’ll be split? Should I be asking my employer for some sort of compensation?!

I feel really let down by my employer that things weren’t arranged properly, and the fact the car on hire was so much more expensive than any car I’d have ever picked myself.  

Thanks so much

Dazed_and_C0nfused

Roughly how much do you earn (the taxable pay which will be on your P60)?

elliemapp94

Hi - I earn £46k before tax 

Marcon

elliemapp94 said:

Hi  - I know a lot of people ask for all kinds of advice in the group so was wondering if anyone can give a little HR/ tax/ legal advice or point me in the right direction.

Disclaimer- I’m aware that tax is somewhat the responsibility of the employee and feel stupid that I didn’t question this with my employer sooner but here we are 🤦🏼‍♀️

I started a new job a year ago and one of the perks is a company car. When I started, I was told there were no cars available through the usual company they use to order the cars and instead I would be given a temporary hire car for a few months. It’s important to note that I was never given a choice of what type of car this would be, and was given a rather large 4x4. 

Fast forward a year, and I still have said hire car. A new manager has started and has now sorted me a permanent company car, arriving this month. He has realised that I should’ve been paying benefit in kind tax on the rented car for the past year and because certain forms weren’t filled in by the previous manager, I haven’t been. 

I’m now potentially faced with a rather large tax bill (I’m estimating £1.5k). I feel let down that these forms weren’t filled in, and somewhat that I shouldn’t be responsible but obviously I know I will be. 

Any advice? And does anyone know if I will be asked to pay this in one go or whether it’ll be split? Should I be asking my employer for some sort of compensation?!

I feel really let down by my employer that things weren’t arranged properly, and the fact the car on hire was so much more expensive than any car I’d have ever picked myself.  

Thanks so much

Tax isn't 'somewhat the responsibility of the employee' - it IS the responsibility.

That said, you're in a slightly different position from many other employees because (a) you weren't given a choice of car (?were you given the chance of a car allowance instead?); and (b) the employer got their reporting wrong.

£1.5K of tax is a lot to find on your salary, so I'd definitely be having a polite but firm conversation with your employer, explaining you can't afford to pay it in one go, and asking if you can pay by deductions from salary over a period of (say) four months.

Dazed_and_C0nfused

elliemapp94 said:

Hi - I earn £46k before tax 

Then the most likely outcome, assuming the total you owe will be less than £3,000, is that HMRC will send you a calculation showing the tax owed and collect it over a 12 month period from 6 April 2024 to 5 April 2025 by a reduced tax code.

Any change to this tax years code (2023-24) will only be to start collecting tax due for this year, not the previous one.

elliemapp94

Yes totally understand. I just feel that this is a joint responsibility in this case, and given it was forms on their part that weren’t filled out, they should be somewhat responsible here. I know from a hmrc pov it will be clean cut- I owe money, just wondering if it’s worth pursuing some sort of compensation from the employer or submitting a complaint about the way it’s all been handled. 

I was never offered car allowance. The hire care was simply there the first day I started my job without any prior communication. 

Thanks for your replies 

DullGreyGuy

BIK is, by its name, a tax on the benefit you recieved. It makes no difference if it was a hire car, they leased it, won it in a raffle or anything else... for you as an employee you will have to pay tax on having the car for personal use irrespective of that. BIK is based on the vehicles formal value, hence employees of giant companies that can get large discounts pay the same BIK as someone in a small company that has to pay more or less list price.

It's your responsibility to realise how your tax works and to know that having a large 4x4 the BIK will be more than having an electric car. What your choices may be could be limited but you are always entitled to refuse to take the car.

Based on your estimated tax due then HMRC will adjust your tax code so the underpayment is collected over the year

Dazed_and_C0nfused

elliemapp94 said:

Yes totally understand. I just feel that this is a joint responsibility in this case, and given it was forms on their part that weren’t filled out, they should be somewhat responsible here. I know from a hmrc pov it will be clean cut- I owe money, just wondering if it’s worth pursuing some sort of compensation from the employer or submitting a complaint about the way it’s all been handled. 

I was never offered car allowance. The hire care was simply there the first day I started my job without any prior communication. 

Thanks for your replies 

You could do however in your op you said you'd started this job a year ago so you won't have accrued certain employment rights.

Up to you to decide if rocking the boat is worth the risk?

https://www.gov.uk/dismiss-staff/eligibility-to-claim-unfair-dismissal

Marcon

elliemapp94 said:

Yes totally understand. I just feel that this is a joint responsibility in this case, and given it was forms on their part that weren’t filled out, they should be somewhat responsible here. I know from a hmrc pov it will be clean cut- I owe money, just wondering if it’s worth pursuing some sort of compensation from the employer or submitting a complaint about the way it’s all been handled. 

I was never offered car allowance. The hire care was simply there the first day I started my job without any prior communication. 

Thanks for your replies 

But if the forms had been submitted on time, you'd still pay the same amount of tax, so the employer's failure to do so is a timing issue - hence suggesting you ask for time to pay (which might in truth be automatic if Dazed's helpful email above correctly predicts HMRC's response).

JCS1

Your tax code is confidential between you and HMRC, your employer does not see how it is calculated. Therefore it is your responsibility to ensure it is correct.

I also suspect it will be done by a tax code adjustment.