An Organisation for all
Accountants in Practice

Company Car Drivers and Online Amendments

By Taxwise

taxwiselogo

It has recently been announced that HMRC has started an online trial that will allow company car drivers to alter their company car details online.

This is a very good idea in principle but without the correct framework it could be fraught with trouble.

The Government has stated that they receive over 4 million calls a year from customers about their tax codes. A system that allows the individual to contact HMRC online at a date and time that suits them is an excellent idea in principle. Anyone who has ever had the misfortune to have to contact HMRC to discuss their tax code, often finds that they have to wait 25 minutes listening to Greensleeves before you get through to an operator who either cuts you off after one second (may explain the high number of successful calls dealt with in full in under a minute by HMRC). Alternatively, you then explain in detail your particular circumstances before you are told to ring another department and have to wait again for another connection.

Using a number of former Tax Inspectors and staff who have processed large company car schemes in industry, we hear many “horror stories” of what can go wrong on a regular basis. Many employers will have specialist staff who deal directly with HMRC relating to company cars and other benefits. It is unlikely that someone working in another department, e.g. the sales team, will have the same technical knowledge.

A common error often relates to the list price of the car. Many people assume that it is the price paid for the car, but this generally isn’t the true list price as many dealers will offer discounts to attract sales so they can reach their sales targets. The employee may give a price based on details from a car sales website, but again these can be discounted.

Clearly, there is extra work for the employer to educate the employee to ensure the correct details are recorded. So, in addition to pay experienced staff to deal with this issue, they may also have to train non-technical staff as well. If an error is made, who is responsible, the employee (with no tax / accountancy knowledge) or the employer? Don’t forget that the company car benefit also attracts Class 1A National Insurance Contributions (NIC). So, if an error is found years later, is the employer responsible for the employee giving the wrong information? Who pays any additional interest (which will be due on late payments of Class 1A NIC) and what about penalties? Is it a genuine error, has the employer taken all reasonable steps to ensure the details are correct?

It’s not unusual for employees (while waiting for a new company car), to receive a number of different cars on short term loan until the company car they’ve requested is available. Is the employee going to be contacting the tax office 4-5 times a month to update them of these changes?

Will the employees provide details about company mileage? It is common for employees to be provided with fuel for business use only. However, if the employee confirms that the vehicle is taken home every night and is occasionally used at the weekend for private use, they may not realise that there is also a fuel benefit which may contradict with the company car policy. Errors found this way can often lead to an employer compliance review, with the additional time and costs to the employer.

Another situation can occur when a non-company car driver is provided with a company car for a couple of weeks while they are temporarily seconded to another part of the business. If the vehicle is only used for business use, will the employee contact HMRC to advise them they’ve had a car for work purposes believing that they’ve had a benefit? If HMRC assess the employee it will incur the employer in additional NIC which isn’t due.

Overall, the scheme is a good idea, but without the employees understanding the correct information to send or record, it can be fraught with many problems. These problems can incur the employer in additional costs which may include interest and penalties.

Published March 2015