Recent issues with online HMRC forms could mean that some employees are paying more tax than they should for their electric company cars. Our tax advisory specialists give their advice on how to avoid and resolve the problem.
Employees with electric company cars that are also available for personal use should check the tax codes on their payslips to ensure they are being charged the right amount of tax. The default input settings on HMRC’s online P11D and P46 (car) forms have led to some people paying higher tax payments.
How to inform HMRC about a company car
Employers must complete a P11D form whenever they assign a company car to inform HMRC that they are providing an employee with a benefit in kind (BiK). A BiK is any non-cash benefit with monetary value that is given to an employee by their employer, such as a company car.
If the car is fully electric, ‘0g/km’ should be noted in the ‘approved CO2 emissions figure’ field and the letter ‘A’ in the ‘type of fuel or power’ field.
A P46 (car) form should also be submitted quarterly by employers, declaring any updates on the company cars they provide – for example, if a new car has been provided or an assigned car has been replaced or withdrawn.
Issues with HMRC’s online form
The HMRC website sets default values for several fields on the P11D form. These values assume that you are using a petrol car with high C02 emissions and, as a result, calculate the annual BiK rate at 37% of the car value.
However, employees with electric company cars are eligible to claim the substantially lower rate of 1% for 2021/22 and 2% for 2022/23. Employees are therefore encouraged to double-check their tax codes to make sure they are associated with the correct BiK rate.
The best way to avoid entering the default 37% rate in error is to always review your P11D form thoroughly before submitting it to HMRC.
Changing an incorrect BiK rate
If a tax code is found to be incorrect, the employee or employer must contact HMRC over telephone to change it.
HMRC employer helpline: 0300 200 3200 (You will need your PAYE scheme or accounts office reference to receive full advice)
HMRC general helpline: 0300 200 3300
If you would like to know more about the taxes surrounding company cars or the variety of specialist tax services we offer, contact us today to discuss your business needs with one of our tax experts.
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