Reporting company car expenses and fuel

If you provide cars to your employees for their own private use, you will need to report this to HM Revenue & Customs (HMRC) using form P11D at the end of the tax year.

The value you will need to list for any vehicles provided in this way is set by HMRC and reflects the list price of the car, VAT, delivery, options worth £100 or more, its fuel type and its CO2 emissions. This is the car’s P11D value.

As an employer, you will need to make National Insurance payments on the basis of the P11D value of the car, less certain reductions, such as if the employee systematically pays you for private use of the vehicle as a condition of use.

The employee will also need to pay tax on a percentage of the P11D value of the vehicle. As an example, a diesel car that emits between 140 and 144 grams of CO2 per kilometre will be taxable at a rate of 30 per cent of its P11D value. The employee will pay tax on 20 per cent or 40 per cent of this 30 per cent, depending on their marginal tax rate.

These rules mean that it is important to choose company cars carefully, both to minimise the cost to your business in terms of national insurance contributions, but also to maximise the benefit to your employees.

For advice on choosing a tax efficient company car, please contact us.

Link: Expenses and benefits: company cars and fuel