Our experts at DSR Tax Claims know how hard it is to find good, quality information about HMRC’s tax regulations that is easy to understand, and that’s why we have created these handy guides to tell you everything you need to know. Our aim is to make life easier for our clients and that is why we want to share our expertise with you. You can also call our friendly team on 0330 122 9972 – we’re the tax experts you can trust.
What do you need to report to HMRC?
If you are an employer and you provide a company car and fuel for your employee to use, you will need to report this to HMRC and there might be additional tax and National Insurance to pay. HMRC will expect you to report any private journeys made in the company car as well as the fuel used for those journeys. You will also be expected to report any cars which have been adapted for use by an employee with a disability.
Are there any exemptions?
Most instances where company cars and fuel have been provided must be reported to HMRC so there aren’t many exemptions to this. If the car or fuel are provided as part of a salary sacrifice arrangement, it must be reported.
To be exempt from HMRC reporting rules, the car or fuel must be used in the following ways:
- Privately owned cars: if the car is privately owned by an employee or director of the company, you don’t need to pay anything.
- Cars available for business journeys only: you don’t need to report or pay anything if the car is used for business journeys only, but you must tell your employee that they aren’t allowed to use the car for private use and the onus is on you to check that they don’t. As far as HMRC are concerned, business journeys are either journeys that are part of the employee’s employment duties (for example, a healthcare worker travelling to visit a patient) or journeys made to a temporary workplace.
- Cars adapted for an employee with a disability: these types of cars are classed as exempt as long as the only private use is for travelling to and from work and travel to work-related training. Any other travel would need to be reported to HMRC.
- Fuel paid for by employees: you don’t report or pay on fuel (including for any private journeys) if the employees buy their own fuel for their own use or you buy it for them and they reimburse you during the tax year and their payment is equal or more than what you paid (i.e. they don’t gain any benefit from you paying for the fuel in the first instance).
- Pool cars: if you provide pool cars for your employees to use, as long as they are only used for business purposes and are kept at the business premises overnight, there is no need to report these to HMRC or pay on them. But if private use of the pool car is allowed or if it doesn’t qualify as a pool car, it will need to be reported and paid on.
- Cars provided to close relatives: for HMRC’s purposes, a close relative means a spouse or civil partner, your child or their spouse or civil partner, your parents or any other dependents or guests of your household. HMRC rules state that you don’t need to pay anything if both of the following conditions apply: you are an employer who is an individual (for example, a sole trader) AND you are providing the car to someone who works in your business but you are only providing the car because they are a close relative and not because they work for you (so, for example, if you give your wife a car as a gift, you wouldn’t have to report this to HMRC). If any other circumstances applied, you would have to report and pay to HMRC.
What do you need to report and pay?
If the cars you provide to your employees aren’t exempt then you need to report them to HMRC and you might have to pay National Insurance on the value of the benefit to your employee.
If you provide company cars for your employees, you initially need to report this separately to HMRC by sending them a P46 form. You can do this online through the PAYE service for employers, through your payroll software or by filling in the form online and then printing it off and sending it to HMRC.
If the car is used for private use, you will then need to include this on your annual P11D form and pay Class 1A National Insurance on the value of the car benefit to your employee.
If your employee uses fuel for private use that you pay for and doesn’t pay you back for it, this will also need to be reported on your annual P11D form and you will pay Class 1A National Insurance on the value of the fuel benefit to the employee.
HMRC state that you must keep records on all the expenses and benefits gained by your employees. You’re also expected to keep a record of the list price of the company cars you provide as you will need these when you work out their benefit value.
How do you work out the value of the company car and fuel use?
HMRC provide online tools to help you work out the value of any cars or fuel that you provide to your employees. If you prefer, you can also work out the value manually using the P11D working sheet 2 – this is the method to use if the car was unavailable for at least 30 consecutive days in the tax year AND you were providing fuel for private use but have stopped doing this now.
HMRC provide advisory fuel rates to help you work out mileage costs in some situations, for example if you are reimbursing an employee for fuel they have bought and used during a business journey.
You will also have to pay employers’ National Insurance on certain road costs if they are considered to be employee benefits. These could include parking permits, congestion charges or road toll fees. You wouldn’t be expected to pay this on such running costs as car services or insurance.
There are special rules for cars which have been adapted for employees with a disability if they are used for private use. In this instance, HMRC doesn’t take private use to include commuting to and from work or any travel for work-related training so these kinds of car use wouldn’t need to be reported or paid on. HMRC also has special rules relating to automatic transmission in cars adapted for disable drivers as well as for any adaptions to the interior that are required to make the car usable for the person with the disability.
If the company car and fuel form part of a salary sacrifice agreement and the cost of the car and fuel is less than the amount of salary given up by the employee, you need to report the salary amount to HMRC instead of the car and fuel value. This only applies to arrangements made after 6th April 2017.
How can DSR Tax Claims help?
We aim to make life as simple as possible for our clients and that includes giving you the information you need to make your taxes (and your life) simpler and less stressful. Our team of experts at DSR Tax Claims are always on hand to help our clients and our excellent standing with HMRC means that we can make sure you don’t fall foul of their regulations, while claiming your maximum tax relief. We can even take care of all that paperwork and deal with HMRC on your behalf too. Call our friendly team on 0330 122 9972 – we’re the tax experts you can trust.