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MARK PERRY of Baker Tilly considers the look of form P11D for the 2002-03 tax year. COPIES OF THE new P11D for 2002-03 have finally been issued by the Inland Revenue. While this may not have been of much import in the past, this is the first year of the new carbon dioxide basis of determining car benefits and is therefore of interest to most employers and practitioners. Overall, the form is much the same: the only changes, apart from the date, are to section E (mileage allowances) and section F (company cars).
MARK PERRY of Baker Tilly considers the look of form P11D for the 2002-03 tax year. COPIES OF THE new P11D for 2002-03 have finally been issued by the Inland Revenue. While this may not have been of much import in the past, this is the first year of the new carbon dioxide basis of determining car benefits and is therefore of interest to most employers and practitioners. Overall, the form is much the same: the only changes, apart from the date, are to section E (mileage allowances) and section F (company cars).
Company cars
Looking at the company cars and fuel section first, the form is much as expected with boxes for registration date, list price, carbon dioxide level, etc. There is a separate box to tick if the car does not have an approved carbon dioxide figure, which will generally be for cars with a registration date before 1 January 1998. The fuel box, though, is more complicated than a simple choice between petrol and diesel, due to the rules for greener fuels. A coding system has been introduced. The following letters distinguish the fuel type of the vehicle concerned:
|
P |
petrol |
|
D |
diesel but not Euro IV Standard |
|
L |
diesel with Euro IV Standard |
|
E |
electric only |
|
H |
hybrid electric |
|
B |
gas only or bi-fuel with carbon dioxide figures for gas held on registration |
|
C |
conversion and bi-fuel cars with carbon dioxide figures held for petrol only. |
In light of the increasing complexity in calculating the car and fuel benefits under the new régime, the working sheet (WS2) has now increased in size from two to four pages. There are currently no Euro IV diesels available in the United Kingdom (the standard becomes compulsory for manufacturers only in 2005), but enterprising employers are expected to import a number of them when they become available elsewhere.
Mileage allowances
The reporting requirements for mileage allowances have changed substantially due to the introduction of the authorised mileage allowance payments. Allowances up to the authorised mileage allowance payments for business mileage are excluded from emoluments, so they need no longer be reported. Generally, only the excess paid over and above these rates for business mileage is reportable, although the text on the form P11D is oversimplified, as it does not make clear that any commuting mileage payments should be dealt with through payroll as additional emoluments. It is worth noting that the box relates not only to cars, but motorbikes and bicycles, for the environmentally conscious employers who pay two-wheeler authorised mileage allowance payments.
Class 1/Class 1A National Insurance
A final thought on the P11D for 2002-03 is that this will be the last year where it will be possible (albeit unorthodox and non-statutory) to pay Class 1A rather than Class 1 National Insurance for ease of administration and yet still arrive at something like the right answer. On benefits such as reimbursed home telephone bills, etc., for employees earning over the upper earnings limit, it has been possible to pay Class 1A through the P11D/P11D(b) system rather than resorting to the ponderous method of paying Class 1 National Insurance through the payroll. Many employers see little sense in creating dummy gross pay, i.e., pay before National Insurance, entries matched by equal dummy deductions from net pay, aiming to generate the correct National Insurance deductions, when the same effective result can usually be achieved by paying over Class 1A contributions once at the end of the year. As the amount payable was generally the same, with only some timing issues over payment dates, the Inland Revenue has turned a blind eye to this approach. However, from 6 April 2003, the new one per cent surcharge on employee National Insurance will mean that this practice gives the wrong result, as there will then be a difference in the total amount of National Insurance payable. Monthly payroll adjustments will have to be considered in future to account for the Class 1 National Insurance due.
