Benefits in Kind and universal credit

BumbleBeas

Hello all,
I’m looking for some advice as I’m really confused by my UC. I work part time and my wages are topped up by UC. 

I used to get roughly £1600 take home and my UC was around £750. I now have a lease car through work and my wages have reduced to roughly £1300 however my UC has not changed and my employer is still reporting my monthly take home as roughly £1600. Is this correct? 

I’ve seen so much conflicting information online about whether or not BIK affect universal credit and my mind is slightly boggled.

Grumpy_chap

I thought someone would comment on the rules here and surprised they have not.
I found the following Q&A which indicates that BIK are not considered in UC:
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/404201/uc-and-employers-faq.pdf
(Please note - the above is from 2015 so may not be current.  The above indicates that how to consider BIK will be kept under review.)

Is your BIK processed through monthly payroll?
Is the SS car an EV with low BIK?

Newcad

The point is that your wages haven't changed, you are just using some of them to pay for the car lease.

OK the employer is paying the lease company directly for you - rather than paying you and then you paying to lease a car yourself. It's probably a cheaper deal if it is done that way.

But if UC were to increase because of that then effectively UC would be paying towards your lease of a car.
That is not what UC is meant for and so it isn't going to happen.

HillStreetBlues

BumbleBeas said:

Hello all,
I’m looking for some advice as I’m really confused by my UC. I work part time and my wages are topped up by UC. 

I used to get roughly £1600 take home and my UC was around £750. I now have a lease car through work and my wages have reduced to roughly £1300 however my UC has not changed and my employer is still reporting my monthly take home as roughly £1600. Is this correct? 

I’ve seen so much conflicting information online about whether or not BIK affect universal credit and my mind is slightly boggled.

Your employer needs to report the correct earnings wages of £1300.
Your UC should then increase to take into account the lower wage.

Newcad said:

The point is that your wages haven't changed, you are just using some of them to pay for the car lease.

OK the employer is paying the lease company directly for you - rather than paying you and then you paying to lease a car yourself. It's probably a cheaper deal if it is done that way.

But if UC were to increase because of that then effectively UC would be paying towards your lease of a car.
That is not what UC is meant for and so it isn't going to happen.

That is incorrect. UC doesn't take BiK into account, so in fact it mean UC does pay towards the lease of the car. There has been talk of looking to change this as it's clearly it's a quirk  of the current system.


EDIT to add the ADM guide https://assets.publishing.service.gov.uk/media/6717bc20a71f39bdb1c9c18a/adm-chapter-h3-earned-income-employed-earnings.pdf H3081

Benefts in kind
H3081 Employed earnings will not initially include certain amounts which HMRC treat as earnings and
are known as benefts in kind1
. These are
1. certain expenses payments
2. cash vouchers and credit tokens
3. living accommodation provided to an employee or a member of their family or household
4. cars, vans and related benefts
5. employment-related loans
6. notional loans in respect of the acquisition of shares
7. disposals of shares for more than the market value
8. employment-related benefts

Newcad

This is not a BIK though, it is the employer paying £300 of the employees existing wages to the lease company on behalf of the employee,

I used to get roughly £1600 take home and my UC was around £750. I now have a lease car through work and my wages have reduced to roughly £1300..

It is £300 of the existing wages that are being used to pay for the lease, it is not some additional 'benefit' that has been granted.
It the employee didn't have the leased car then they would still be taking home £1600 - their wages haven't changed.

HillStreetBlues

Newcad said:

This is not a BIK though, it is the employer paying £300 of the employees existing wages to the lease company on behalf of the employee,

I used to get roughly £1600 take home and my UC was around £750. I now have a lease car through work and my wages have reduced to roughly £1300..

It is £300 of the existing wages that are being used to pay for the lease, it is not some additional 'benefit' that has been granted.
It the employee didn't have the leased car then they would still be taking home £1600 - their wages haven't changed.

The title of the thread is Benefits in Kind. the OP now gets a reduced wages to account for the BiK (that's how Bik works).

Dazed_and_C0nfused

Newcad said:

This is not a BIK though, it is the employer paying £300 of the employees existing wages to the lease company on behalf of the employee,

I used to get roughly £1600 take home and my UC was around £750. I now have a lease car through work and my wages have reduced to roughly £1300..

It is £300 of the existing wages that are being used to pay for the lease, it is not some additional 'benefit' that has been granted.
It the employee didn't have the leased car then they would still be taking home £1600 - their wages haven't changed.

I suspect the op has used a salary sacrifice arrangement as part of obtaining a company car.

AIUI that is a contractual reduction in salary, hence the reduction in take home pay, and in return they have a company car.  On which a company benefit will arise.  That might be taxed via payroll (payrolling of benefits in kind) or via a P11D and tax code adjustment.

But whichever method the employer uses it's still a company car.

TimeLord1

Surely the terms of any lease will show the amounts and who will be paying for what servicing, MOT, Fuel, milage, insurance and if they decided to leave the business leaving the employer with the lease costs. I used to lease a car from a driving school and had to pay regardless of earnings.

DullGreyGuy

TimeLord1 said:

Surely the terms of any lease will show the amounts and who will be paying for what servicing, MOT, Fuel, milage, insurance and if they decided to leave the business leaving the employer with the lease costs. I used to lease a car from a driving school and had to pay regardless of earnings.

Yes, but the OP isn't party to the lease so may or may not have sight of any of the paperwork. Yes also if the employee leaves the employer remains liable for the remainder of the lease, have seen contracts that move the early termination costs to the employee but most cases it just goes into the pool of available vehicles and may be offered to another employee.

huckster

Agree with @HillStreetBlues and their post at 4.20pm.

OP needs to contact Universal Credit and ask for Mandatory Reconsideration of Universal Credit payment statement, based on earnings considered being incorrect. Quote the guidance as advised in the 4.20pm post. 

The point is the lease car is not earnings. It is a tool that enables someone to work and is part of what the employer offers to enable employees to have a suitable vehicle to use as part of their work.

Grumpy_chap

Newcad said:

This is not a BIK though, it is the employer paying £300 of the employees existing wages to the lease company on behalf of the employee,

I used to get roughly £1600 take home and my UC was around £750. I now have a lease car through work and my wages have reduced to roughly £1300..

It is £300 of the existing wages that are being used to pay for the lease, it is not some additional 'benefit' that has been granted.
It the employee didn't have the leased car then they would still be taking home £1600 - their wages haven't changed.

The OP has used a SS scheme to sacrifice some salary in return for a company car (probably EV with low BIK).  The result is reduced salary.  The BIK associated with the car is treated the same way as any other BIK element and not considered within UC under current rules.

As noted above, it is a quirk of the system.
Another very similar quirk is SS for pension contributions (though pension contributions can still be made after salary received and then not considered for UC - not always easy to have correctly processed).

There are also quirks in the system around SS and car / pension for higher earners to avoid higher rate tax, avoiding withdrawal of personal allowance, retaining child benefit, retaining child care eligibility.

This forum can only state the rules as they are.