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Where Taxpayers and Advisers Meet

Car Salary Sacrifice - BIK Clarification

Nsushi33
Posts: 3
Joined: Fri Nov 09, 2018 10:36 am

Car Salary Sacrifice - BIK Clarification

Postby Nsushi33 » Fri Nov 09, 2018 10:48 am

Hi All,

I'm hoping someone might be able to offer some advice as I feel like I'm going to lose the plot!

My wife's employer started a salary sacrifice company car scheme back in 2015. The idea behind it was that they leased a car and you paid the lease amount through salary sacrifice. The car was for personal use but in terms of tax you would also be subject to the P11D, this includes claiming for business mileage.

In July 2015 she decided to get a car through the scheme. She paid £388 per month before tax was taken off.

The question is related to her paying too much tax and so I need some clarification on how it all adds up. So from I can gather, I've worked out that she should've been taxed as annual salary - salary sacrifice + bik value = taxable income. What's actually happened is annual salary + bik value = taxable income. The thing is I'm not sure which one is right, or even either of them are right. Maybe someone with a lot more knowledge than myself can help?

Thanks in advance

robbob
Posts: 2628
Joined: Wed Aug 06, 2008 4:01 pm

Re: Car Salary Sacrifice - BIK Clarification

Postby robbob » Fri Nov 09, 2018 12:06 pm

are you saying they have deducted the salary sacrifice amount on her payslips but have shown this as deduction from net pay rather than gross pay?
Ie gross pay 1500 deduction 388 1500 taxable pay (wrong) - correct would be =1500 gross pay 388 deduction 1112 taxable pay (this amount would be shown on p60


the two statements below seem to be saying the exact opposite
She paid £388 per month before tax was taken off.
. What's actually happened is annual salary + bik value = taxable income.

If that is the case that gross pay = taxable pay despite the deduction speak to the employers payroll department to see whatsssssuppppppp

That would be particularly strange if that is the case but anything is possible - one wanders if anyone has ever had a free car due them forgetting to deduct the salary sacrifice amounts - i guess if they forget that they could forget the p11d too.

Nsushi33
Posts: 3
Joined: Fri Nov 09, 2018 10:36 am

Re: Car Salary Sacrifice - BIK Clarification

Postby Nsushi33 » Fri Nov 09, 2018 3:31 pm

Hi robbob,

Many thanks for coming back to me.

I think thats what we're still trying to work out, its giving me a headache :lol: :lol:

Her payslips are showing that the £388 has come out before tax, however she received a letter about a tax code change a year or so ago and the equation was annual salary (which was correct) + bik. Almost like the salary sacrifice doesn't exist according to HMRC.

Her payroll department have been a little bit rubbish at helping out to be honest, but after 6 weeks of badgering them we seem to be getting somewhere (somewhere being they have given her all the information and was told to sort it herself with HMRC).

This all started because after the car went back in July this year, her tax code changed to go up, but didn't go back to normal. When she spoke to HMRC about it, they explained that they hadn't had some of the information from her payroll department over the whole term and she might have been taxed wrong. They immediately put her back on the normal personal allowance tax code.

Thanks again.

robbob
Posts: 2628
Joined: Wed Aug 06, 2008 4:01 pm

Re: Car Salary Sacrifice - BIK Clarification

Postby robbob » Fri Nov 09, 2018 4:01 pm

however she received a letter about a tax code change a year or so ago and the equation was annual salary (which was correct) + bik. Almost like the salary sacrifice doesn't exist according to HMRC.
I think this is where you are getting confused -

example of how it will work

normal salary 20k
salary sacrafice 4k
taxable pay as declared on p60 16k

first up confirm the above works as described and if it does everything is in order - salary sacrifice has reduced taxable pay and therefore less tax has been deducted than would have been the case had the salary sacrifice not been in place.

anything else that doesnt make sense is nothing to do with whether the salary sacrifice is correct or not and will be down to tax coding issues.

reference tax codes issued - these arent always 100% accurate and sometimes result in a post year end adjustment (p800 or simple assessment) meaning tax is owed or a refund is due.

Generally speaking unless the figures on your p800/simple assessment are known to be wrong they will put you back in the correct tax position - in this regard the salary should be the 16k detailed above and the car benefit should be as declared on the p11d.

due to delay in car benefit amounts appearing on your tax code its not that unusual that tax is owed at the year end.

If you havent had a year end p800/simple assessment and the P11D benefit in your tax code doesnt match the one provided by your employer you should ring hmrc to discuss the implications - you can score here as generally they wont bill you after the year end if the underpayment of tax is less than £50

Note you actual salary level doesnt show up anywhere on your coding notice so is non relevant.


This all started because after the car went back in July this year, her tax code changed to go up, but didn't go back to normal. When she spoke to HMRC about it, they explained that they hadn't had some of the information from her payroll department over the whole term and she might have been taxed wrong. They immediately put her back on the normal personal allowance tax code.
Generally this will all come out in the wash after p11d is submitted and we reach this time of year - anything hmrc processed before the issue of the p11d in juneish is likely to be amended back to the p11d details supplied by the employer

in summary unless the p11d figure on your tax code / end of year tax calc are different than the employer provided totals everything will likely be correct even though that may end up with an assesment of tax.

Nsushi33
Posts: 3
Joined: Fri Nov 09, 2018 10:36 am

Re: Car Salary Sacrifice - BIK Clarification

Postby Nsushi33 » Fri Nov 09, 2018 4:27 pm

Thanks again robbob,

Since my last message, some new evidence (thats what it feels like :lol: :lol: ) has come about. My wife has forwarded me all the P11D's that she received from payroll today. One of them has been changed after submission as it doesn't match up with what we have at home and appears to be on a newer type form.
in summary unless the p11d figure on your tax code / end of year tax calc are different than the employer provided totals everything will likely be correct even though that may end up with an assesment of tax.
I've checked each P11D and according to HMRC's company car tax calculator, the value is wrong on each one. I've found lots of BIK calculators online, but I can't get anywhere near the value's they've entered. My assumption here is that the software the company uses has given the wrong value, or someone doesn't know how to use a calculator!

Also further to this, she mentioned that its been escalated within the company and they're conducting a full review into everyone's P11D's, etc. Fingers crossed we might get some answers.


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