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Sam
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Category: Tax
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My wife is an employee of my business and I pay her a small

Resolved Question:

My wife is an employee of my business and I pay her a small salary each month for the admin work she performs (generally £250 to £350 per month). Is there any way I could get a company car for her but legitimately avoid the taxable benefit/P11D/Class1A NI liabilities?
Submitted: 3 years ago.
Category: Tax
Expert:  Sam replied 3 years ago.
Hi

Thanks for your question, I am Sam and I am one of the UK tax experts here on Just Answer.

As long as she uses it for business only, and there is no private usage - then there is no taxable benefit or need to complete form P11d (and P11db) or any Class 1A liability on you
" the employer"
You (and your wife) would be expected to keep records that the car was only used for business journeys which tied in with the mileage readings on the car.

But if there will be private use, then whilst your wife's salary is below the £8500 a year P11d threshold, as she could be argued to have an interest in the business due to her relationship with you, then a form P11d would have to apply, and a taxable benefit for the car (and fuel if she did not make good all of the private fuel) and you then would be subjected to Class 1A contributions
But note the £8500 threshold applies to salary and all benefits supplied, for which I would expect this to exceed the £8500 threshold as her salary is a maximum of £4200 and unless the company car charge (plus any fuel charge) was below £4300 then the P11d would still apply.

A pool car might be a consideration - a pool car is defined by HMRC as
Pool cars

Definitions or restrictions

Pool cars must meet the following conditions:
• used by more than one employee
• not ordinarily used by one employee to the exclusion of others
• not normally kept at or near employees' homes
• used only for business journeys - private use is only permitted if it is merely incidental to a business journey (for example, commuting home with the car to allow an early start to a business journey the next morning)

What to report, what to pay

Provided all these conditions are met, you have:
• no reporting requirements
•no tax or NICs to pay

But if she is your sole employee - then this does create its own problem as I am sure you can see.

If she undertakes business mileage in her own vehicle - then you can pay her a tax free amount up to 45p a mile for the first 10,000 miles and 25p a mile thereafter, and if there are not the resources within the business to do this, she can claim this from HMRC, on a form P87 claim form.

Thanks

Sam
Customer: replied 3 years ago.
My query related to a small company. From my brief look on the internet I did not think that non business mileage was a consideration. Are you saying that even though wife's salary plus the taxable benefit of the car was below £8500, despite this she and the company would be hit with further taxes via p11d and class 1a insurance contributions? I thought the p11d would be avoided?
Expert:  Sam replied 3 years ago.
Hi Geoff

Thanks for your response

Non business mileage is always a consideration regardless of the size of the business, where the employee does not make good that amount out of their own pocket.

If its a company car and there is private mileage for which the individual pays for out of their own pocket, OR reimburses the company for, there is no fuel charges but if all fuel is paid for by the company, and some of this constitutes private mileage - and its not paid for by the employee (either directly or back to the company) then there is a fuel benefit charge.
So you have the car being provided, is there private use - if yes, then there is a car benefit charge. Then the fuel has to be looked at - does the company pay for ALL the fuel (both business and private) if Yes then there is also a fuel benefit charge

And if the salary plus the taxable benefits (so company car charge and any fuel benefit charge and any other benefits such as medical benefit or company credit card etc) is below £8500 then a P9d is completed but there is no taxable benefit - if it adds up to more, then a P11d is completed and tax and Claa1 A national insurance is due.

See link here which covers when a P11d or P9d must be completed and the charges that arise

http://www.hmrc.gov.uk/payerti/exb/forms.htm#3


Thanks

Sam
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