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Kelly Sizer of LITRG explains that disabled employees who drive automatic company cars should act now to claim a new relief, and employers should note the changes.

The basics

If your boss provides you with a company car, you generally have to pay tax on the value of the 'benefit in kind'.

Basically, your employer calculates the taxable value of the car based upon:

• the dates when it is available for your use;
• its list price when it was new, plus the list price of certain optional extras; and
• its CO₂ emissions.

Your employer will give details of the benefit to HMRC (using a form called a P46(Car)) and HMRC will then adjust your PAYE code to collect the tax you owe on the benefit. Depending on when your employer notifies HMRC of the car benefit, you might have to catch up paying some of the tax on it in the next tax year, again via the PAYE system.

So what’s new?

If you meet the following criteria, your employer can already calculate the benefit figure for an automatic company car benefit using the CO₂ emissions figure of an equivalent manual. But from 6 April 2009, you can also substitute the list price of an equivalent manual car if it is lower than the automatic. 

The criteria are:

• Due to a disability, you must need to drive an automatic rather than a manual vehicle (the car must not have a clutch pedal or manual lever to change gear); and
• You hold a 'blue badge' at any time in the tax year when the company car is made available to you.

If you are eligible for this new relief and require a change to your PAYE Code, you should contact HMRC with the relevant details – your employer should be able to help you find out whether the list price of an equivalent manual car is lower than that of your automatic. HMRC’s contact details should be given on your Notice of Coding, or your employer should be able to tell you which tax office deals with your employment with them. 

Employers should note that they can also help eligible employees to secure their relief by submitting a P46(Car) with the amended details. Of course, employers will also need to note the change in the rules for the purposes of completing 2009/10 P11Ds next year. 

But what if you don’t meet the criteria?

Say you are disabled and need to drive an automatic, but your local authority has assessed your blue badge application and refused it on the grounds you can walk a certain distance without discomfort. 

When this new relief was debated in Parliament, LITRG raised a number of questions about the way in which it will operate and the possible unfairness in cases such as the example above. We felt that in general the qualification criteria were too strict. In response to this challenge, the Minister replied:

'…it is worth stating clearly that, in exceptional cases, affected individuals in particular circumstances will be able to contact HMRC to seek guidance about whether there is any flexibility or any prior agreement that can be reached.'

And, when concern was raised that such flexibility does not appear to be contained in the legislation itself, she went on to say:

'I cannot possibly begin to describe the circumstances, because those will depend on the individual’s situation.  If people feel that, in their individual circumstances, it could apply to them, HMRC is saying that individuals who are affected should contact it first before applying and it will be happy to have that conversation.  If I can provide further detail, I will.'

(Hansard, 11 June 2009, Columns 358-359)

We hope that these reassurances will mean HMRC will go the extra mile for those with disabilities, and use their collection and management powers generously so as to embrace those who deserve to get the benefits anticipated.   

If you therefore think you are deserving of the relief but do not meet the strict criteria, do make your case to HMRC. LITRG would be interested to hear about specific cases of unfairness. 

More information – useful links

The LITRG website provides a 'brief guide to the world of tax for disabled people', which in turn provides other useful links.

LITRG also give a basic explanation of benefits in kind.