P11Ds and Company Car Provisions - What you need to know

As we are now into P11D season for clients, it is timely to highlight a complex area relating to company car provision, where we are seeing benefits not being reported on forms P11D because company costs are being charged to employees/Directors. This treatment is not correct and can lead to liabilities and penalties for clients, with wider connotations relating to completion of accounts and CT returns.

Dated: 20 April 2022 Author: James Hunt, Employment Services Senior Manager

Overview – Provision of Company Car

Where a car is provided to an employee/Director, by reason of their employment, and available for private use then a benefit in kind arises, requiring declaration on form P11D. This applies whether a car is purchased or leased by the company. If the purchase invoice or finance lease is in the name of the company, not an individual, then it will be deemed to have provided the car to the employee. Cars owned by third parties that are made available to employees can still give rise to a car benefit if they are made available by reason of the employment.

Charging all the car costs to the DLA and not claiming capital allowances will not stop a car being a company car for P11D purposes. A P11D requirement will arise, see the points below for how the benefit can be mitigated. Inclusion of the vehicle and related costs/allowances should be accounted for in the accounts and CT returns.

Employee Contributions

If the employee makes payments to the company in respect of that car, even of the full value of costs incurred by the company, it does not mean that a company car has not been provided for P11D purposes. A P11D benefit still arises, with relief against the benefit only available in two ways:

  1. Capital Contributions – limited to a one off of £5,000 per company car, this reduces the list price on which the car benefit is charged
  2. Private use – where an employee is required to make payments to their employer, as a condition of the car being available for private use, payments made in the tax year can be offset against the P11D benefit charge

Written agreements between the parties, setting out the nature and terms of any employee contribution relating to company car provision, are advisable.

Fuel Provision

Remember, if a car has been provided then a fuel benefit will also arise if the employer has met the cost of any private fuel during the tax year. The fuel benefit can be removed if the employee makes good the full cost of private fuel by 6 July after the end of the tax year.  

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