Use of Car AFTER leaving employment - P11D values

[Coylie]

I have a client who left employment on 31 December. He had use of a company car while employed and was subject to the usual Car Benefit charges on his P11D.

As he was leaving the company as a "good leaver", the terms of his compromise agreement included that he would be allowed to continue using the vehicle until he secured a new job. It is looking like he will not now have any new employment in the 2018-2019 tax year.

The question is what P11D value is he going to have for 2018-2019 tax year in respect of the car? Is it based on the 9 months (April to December 2018) he was in employment, or will it be based on the full tax year, (even though he was not in employment Jan-March 2019)? It is important as he is on the cusp of Child Benefit High Earners charge, so will need to consider making some pension contributions before 5 April to minimise Child Benefit clawback.

Any guidance gratefully received

C

[bd6759]

The P11D benefit will be the amount apportioned to the date of leaving.

Any benefit received after then is not taxable under the benefit code because he is no longer an employee. The value of that benefit will be caught by s401, the provision that is used to tax redundancy and ex-gratia payments. The calculation is the same (by virtue of s415) inasmuch as you use the scale charge, but the first £30,000 of all such payments is exempt.

Put another way, the use of the car is part of his leaving package and is taxed (or is exempt) in the same way as any ex-gratia or redundancy payment.