Yesterday I posted an item ?If you really want to pick fault with company car tax?, (unfortunately the ?tax? bit disappeared from the title). For the first time I scored a duck, with no replies and I would appreciate some feed back.
I posted the Item because I have defended some aspects of the new company car tax system and to give a balanced picture I wanted to draw attention to one part of the regime that I think is absurd and is evidence of stealth tax elements of the system.
Was this too technical or just too boring to be of interest to the backroom?
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Paul is a bit late with this. If he had a problem with the new BIK regime he should have voiced his concerns a year ago (the system has been a FAQ answer on this site since October 2000). Now the entire industry is geared around the new regime and if changes or concessions are suddenly made it will throw the entire industry haywire. If you are a mega high mileage company driver, then one answer is to get a company van. A more acceptable answer is to get a company Passat TDI 130PD S which will cost less than £1,200pa for BIK however many company miles you do. The other is not to make journeys which are not entirely necessary. But it's very difficult to make a case for guys who want to continue driving their company Jaguars 40,000 miles a year at the same tax rate as they are paying now. These guys are getting something for nothing at everyone else's expense.
HJ
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Thanks for your response HJ. I personally have no problem with the new BIK regime as it doesn?t apply to me! However people are still posting items on this site (like this weekend) that make it quite clear they do not understand the new system. I have tried to provide helpful advice and felt I ended up sounding like a party political broadcast. So I have indicated an area where I think employees have a genuine grievance.
As you say HJ, changes or concessions are unlikely at this stage, so I would add to your list of general comments, be very careful about allowing your employers to provide your private fuel. You need to be doing truly huge amounts of private mileage for it to be a tax efficient thing, much better to say you?ll pay for your own private fuel and agree a pay increase.
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Paul, not too technical and I think it deserved an airing. It is another example
of lack of joined up thinking all in the cause of raising revenue. Plus I totally agree about the fuel allowance thing, I reckon the only folks where it might be worthwhile are those with an extreme commuting distance.
I asked a question in a previous tax thread which did not get a response but it was hidden at the end about something I don't understand re the current system I'll copy it below in case you're interested or missed it. OK I know this is about to disappear in a few months but it still applies and I cannot get a sensible explanation why other than that's the ruling, very helpful...not.
posted on company car tax thread"
Another anomaly which peed me off was that overseas mileage did not count towards the allowance only mileage in UK. Someone explain the logic of that one. Eg if you need your car to take a lot of technical kit into near Europe and its not practical to check it in or send it air freight why can this mileage also not be allowed. Seems the tax man applies the law to his own ends. Just as with duty paid booze and tobacco allowances."
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Hello Stuart
Thanks for your comments.
I will try to get an answer to your question tomorrow.
Regards
Paul R
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Stuart
I?m not sure if you have been given the correct information. I looked in Revenue booklet 480 ?Expenses and Benefits A Tax Guide?. On page 26 where it is talking about the P11D business mileage thresholds for Company Cars, it quotes from schedule 6 para 2 sec 47 FA1999
?From 6 April 1998 business travel means any travelling for which the expenses would be qualifying travelling expenses if they were
incurred by the employee? That's logical i.e. business mileage is business mileage if it would qualify for tax relief if you had paid the expenses yourself.
It goes on to refer you to Revenue booklet 490 ?Employee Travel - A Tax and NIC Guide for Employers? in sections 7.6 to7.7 it says
?An employee who is resident and ordinarily resident in the UK and carries out part of his duties abroad, is entitled to tax relief if the duties:
- Can only be carried out abroad - for full the cost of all journeys from anywhere in the UK to the place where the employee is working and return journeys to the UK (S194 (1),(3) and (4))?
That suggests to me the sort of overseas trips you mention would qualify for tax relief and therefore should be considered business mileage.
Both booklets are available to download from the business part of the leaflet and booklet section on the Revenue site www.inlandrevenue.gov.uk.
Have a look and let me know what you think. If you believe your P11D has been wrong in the past, Email me and I?ll tell you what you need to do.
Regards
Paul R
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Thnaks Paul,
Your explanation seems fair and I do not not know why these were excluded.
I will download the booklets and have a good look back in the records. Have to wait till next week when I'm home.
Thanks,
Stuart
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Seeing as the fuel price at the pump contains around 60p per litre in duty in any case, I would have thought that there was little case for a separate taxable benefit charge for fuel.
Thinking aloud:
Either the employee or the employer is paying the duty.
The duty is not reclaimable by the employee, nor by the employer, but the cost is an allowable expense against profits for the employer (assuming that the employer is liable to either schedule D income tax or to corporation tax).
So, at present the employee gets taxed and the employer gets tax relief.
Seems like a case of both the Inland Revenue and Customs and Excise getting a bite out of the same cake.
As a quick calculation (unchecked) I recon HJ's Jag driver doing 40,000 miles per year at 25 mpg would be contributing £3,750 in fuel duty, before even starting on the BIK.
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Paul, you were probably thinking of me when you mentioned posts last weekend on this. Sorry I'm slow but I still do not understand the thinking as to why a person who has a company car as a perk perk but drives little or no genuine business miles (i.e. excluding the journey to/from work) gets a substantial reduction but a guy who has to, repeat has to, drive many k miles to do his job gets clobbered. Similar cases have been published in the press.
The best thing I can do is demonstrate this by asking my offspring if they are prepared for their details to be published here. I hope to be back to you ...
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Hello Colin
I don?t think we need to look at private details. If we take a ?hypothetical? case of two people who have identical company cars, person A does less than 1k business miles a year, person B does 30K business miles a year.
Under the old (current until 05/04/02) system person A would suffer a tax charge based on 35% of the price of the car. person B would suffer a tax charge based on 15% of the price of the car. Person A will pay much more tax than person B.
Under the new system persons A and B will suffer the same tax charge as they drive identical company cars. In most cases person A will see their tax charge reduce and person B will see a substantial increase in tax charge.
The logic behind the new system is:
The tax charge is for the car being available for private use, the amount of business use is irrelevant, a company car is either available for private use or not, If it is not available for private use there is no tax charge.
Regards
Paul R
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Try www.businesscarsolutions.co.uk you can find out ALL you need to know about Company Car tax.......
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