Cars, expenses and benefits-in-kind
Not so long ago company directors and higher-paid employees used to have perks called “expense accounts” and company cars both of which had, in effect, some element of extra remuneration in them.
The Inland Revenue seemed to take a long time to recognise these practices which were endemic but now it has and these parts of remuneration packages are not only subject to tax but national insurance as well.
Company cars
The original aim of the taxing of the benefit of having the use of a company car was to equalise the advantages and disadvantages so that the recipient would have a car allocated to him for commercial purposes and not as a tax dodge.
Not sooner had this been achieved than the country became environmentally conscious. And the company car got it in the neck again. Now, instead of the car being taxed according to value it is taxed according to the amount of carbon dioxide it generates. Not only that but the benefit is no longer reduced by the number of miles the taxpayer does on company business.
The calculated benefit is included in the calculation of the individual’s PAYE code as a reducing element so the tax is collected in that way.
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Cars
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Motor-
cyles
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Cycles
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First 10,000 miles - per mile
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40p*
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24p
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20p
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Over 10,000 miles - per mile
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24p*
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24p
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20p
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*increase by 5p per passenger
The table of taxable company car fuel benefits are here.
Vans
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2007-08
onwards
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2006-07
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£
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£
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Vans under 4 years-old
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3,000
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500
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Vans 4 years-old and over
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3,000
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350
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Fuel benefit
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500
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-
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Private use is unrestricted but, if limited to employee's home-to-work travel, no tax charge will arise
Expense accounts“And how generous is your expense account?” used to be the third item on the remuneration package agenda after salary and car. It seems hard to believe now but employees would be paid round-sum amounts to cover expenses on, say, a business trip to another part of the country. The amount paid would be in excess of that required and the employee wouldn’t be expected to return the unused amount. Nowadays the employer has to report via P11Ds the amount paid to employees for expenses. From that sum the employer has to deduct the total of the actual expenses incurred so that the employee will be taxed on the rest. If the Inland Revenue consider that the expenses regime in a company is acceptable so that these excesses don’t occur it may give dispensation against the necessity of this reporting.
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