This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our privacy notice.
Analytics

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.

Marketing

A bit of data which remembers the affiliate who forwarded a user to our site and recognises orders from those who become customers through that affiliate.

Essential

Tools that enable essential services and functionality, including identity verification, service continuity and site security.

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.

Tax Insider Lite

FREE tax strategies delivered to your inbox every month.

  • By clicking on the button below you agree to the terms & conditions and the privacy notice of the website.
  • Subscribe for FREE