A SIMPLE GUIDE TO BENEFITS IN KIND
This is a basic guide and should not be used as definitive guides, since individual circumstances may vary; specific advice should be obtained, where necessary.
Expenses and Benefits in Employment – Transport
Expenses and benefits received by reason of employment (whether paid by the employer or another person, e.g. tips) are generally taxable. This guide gives an overview of the following benefits:
- Vans, cars and petrol
- Mileage allowances
The charge is based on a percentage of the car’s list price, graduated according to the car’s carbon dioxide emission levels, maximum 35%. www.vcacarfueldata.org.uk/
- For a petrol car, the benefit is calculated by multiplying the car’s list price and the appropriate percentage, based upon the car’s CO2 emissions. Note that prior to 6 April 2011, the list price of the car was capped to £80,000 but this cap no longer applies from 2011/12 onwards.
- Where a disabled driver must use an automatic car, the benefit is that for an equivalent manual car.
- If the car is unavailable for part of the year, the charge is proportionately reduced.
- If the employee makes a contribution towards private use, this will reduce the benefit in kind
- HMRC have a useful car at fuel benefit calculator on their website at http://www.hmrc.gov.uk/calcs/cars.htm
Classic cars (more than 15 years old at the end of the tax year), where the market value is greater than the list price and is at least £15,000, the chargeable benefit is the relevant percentage of the greater of list price and market value.
Where an employer provides an employee with free fuel for private purposes, the taxable benefit is linked to carbon dioxide emissions. The percentage used for the fuel benefit is applied to a figure set by the Treasury, currently, £18,800 for 2011/12. If the free fuel benefit is withdrawn during the year, the taxable figure is apportioned. If the employee makes a contribution towards private fuel, this will not reduce the fuel benefit unless every drop of private fuel is reimbursed, i.e. it is an “all or nothing” benefit.
Vans used by employees
From April 2007, the scale charge for all vans with unrestricted private use is £3,000. If the employer provides fuel for unrestricted use, a fuel charge of £550 will also apply. Where vans are shared (other than pool vans, where there is no benefit), the employees are charged on their share of the use of all the employer’s vans. The maximum charge is reduced by any period of 30 days when a van was not available for use. Fuel for insignificant private use is disregarded.
Passenger payments up to the approved rate for business travel may be made to an employee carrying passengers in his or the company’s car or van.
The following transport benefits do not give rise to a taxable benefit in kind:
Works bus services
- Benefits arising from an employer providing or subsidising a works bus service are exempt.
- Where the benefit is provided by a ticket or voucher, any benefit under the voucher rules is exempt.
- The bus must have a seating capacity of at least 12 and must be available to employees generally.
- Parking facilities (car, motor cycle, or cycle) at or near workplace.
- Emergency vehicles when employee is on call
- Small loans totalling £5,000 or less, e.g. season ticket loans, can be disregarded.
- Cycles and cycling safety equipment – For details of the Cycle to Work scheme, under which it is possible to provide cycles and safety equipment to employees in a tax efficient manner, visit http://www.dft.gov.uk/pgr/sustainable/cycling/cycletoworkguidance/
- Lunchtime use of works’ buses
- Taxis for late working (exceptionally)
There is a tax-free approved amount, currently 45p per mile up to 10,000 miles and 25p thereafter, where an employee uses their own car for business use. If the employer pays more than that, only the excess is taxed. If the employee reimburses an employee with amounts that fall below the HMRC-approved rates, the employee may claim any deficit as a deduction from his earnings from employment under s336 ITEPA 2003.
Mileage payments within the HMRC approved rates do not need to be reported on form P11D.
If the driver of a vehicle carries at least one passenger on a business trip, he may claim an additional 5p per mile. This applies whether to both cars and vans and to use of an employee’s own vehicle OR a company vehicle.
Note, if the employer pays less than 5p per mile (or nothing at all), there is no equivalent to Mileage Allowance Relief, i.e. the employee is not entitled to claim a deduction under ITEPA 2003,s336 for the shortfall.
An employer can agree with his tax office that certain benefits e.g. business travel will not be taxable, if for example, only business expenses are reimbursed. This is known as a dispensation. A dispensation can be applied for using a form P11DX which can be accessed via the following link, http://www.hmrc.gov.uk/forms/p11dx.pdf
Changes to Car and Fuel Benefit:
With effect from 6 April 2012:
- The 10% benefit category for cars with emissions of 120g/km or less will be removed.
- Cars the emit 99g/km or less of CO2 will be subject to a 10% benefit charge
- The benefit charge will increase by 1% over and above the 10% rate for every 5g/km increment in CO2 emissions over 99 g/km.