Are there any benefit-in-kind implications for employees with company cars that I should be aware of?
I have some questions around the benefit-in-kind (BIK) implications for employees with company cars. My current process is that I pay for the car lease (£500 per month) and the employee pays for the insurance and fuel, but claims monthly via expenses the business miles at the HMRC company car rate; the employee makes a contribution of £50 per month towards the car. However, I was wondering if there is any BIK liability for the employee or does the salary sacrifice offset this? Also, if there is a BIK, how should the employee tax liability be settled - via payroll monthly or on their form P11D at the end of the tax year? The company has settled last years' employers’ National Insurance contributions on the P11D form.

Arthur Weller replies:
There certainly is a BIK liability for the employee in this arrangement, but the £50 contribution is deducted from the car benefit charge, provided it is made before the end of the tax year. The form P11D at the end of the year is a suitable way of dealing with the employee tax liability.

Case Study

I have some questions around the benefit-in-kind (BIK) implications for employees with company cars. My current process is that I pay for the car lease (£500 per month) and the employee pays for the insurance and fuel, but claims monthly via expenses the business miles at the HMRC company car rate; the employee makes a contribution of £50 per month towards the car. However, I was wondering if there is any BIK liability for the employee or does the salary sacrifice offset this? Also, if there is a BIK, how should the employee tax liability be settled - via payroll monthly or on their form P11D at the end of the tax year? The company has settled last years' employers’ National Insurance contributions on the P11D form.

Arthur Weller replies:
There certainly is a BIK liability for the employee in this arrangement, but the £50 contribution is deducted from the car benefit charge, provided it is made before the end of the tax year. The form P11D at the end of the year is a suitable way of dealing with the employee tax liability.

This question was first printed in Business Tax Insider in November 2017.

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