The P46 Form is an important part of company benefits relating to company cars and vehicles, understanding it’s value, what it does and when to use it is crucial to every business in the UK.
What is a P46 Form?
Very simply the P46 car form is a form which employers can use to notify HMRC when they
- provide a company car to an employee
- stop providing a company car
- provide someone with an additional car
The major advantage of this form is that it can be submitted during the financial year. The same information can be notified to HMRC on form P11D, but this can only be done after 5th April each year.
When to use a P46 Form?
If an employee is first provided with a car which is available for private use in say May in the tax year, the income tax on the benefit in kind starts accruing straight away.
If the benefit isn’t notified to HMRC until after the end of the tax year, then 11 months of income tax has accrued and needs to be paid in arrears. The underpayment may be deducted from the salary under PAYE as a lump sum which could be very painful
If form P46 is used immediately on provision of the car then HMRC can amend the employees tax code so that the tax on the BIK is deducted under PAYE throughout the year, which is much less problematic from a cash flow point of view for the employee.
The same consideration applies where the car is changed during the year for a car attracting a higher benefit in kind. Alternatively if the car is changed for one which has a lower benefit in kind rate, then this can be immediately reflected in the employees tax code and result in less tax being deducted.
If you want to learn more about tax, employee benefits and navigating your finances, get in touch with our Leeds & Ilkley based accountant team.