If your business was unable to trade during lockdown, it may be that the benefit-in-kind charges estimated and adjusted for in your and/or your employee’s tax codes could now be too high both for 2019/20 and 2020/21.
This is likely to be the case where you or your employee ceased using company cars and fuel, and they were not made available by the company during lockdown.
For 2019/20, this could mean that too much PAYE was deducted at source and with the P11Ds now filed for this tax year, anyone affected could find that they have a tax refund to apply for.
If you let us know how long the cars were unavailable for, we can help to ensure the 2020/21 PAYE tax codes are correct so that moving forward the right amount of PAYE is deducted at source, in relation to the benefit-in-kind.
Although company cars are the most likely benefit-in-kind to be affected, this will also apply to any company asset normally made available for use by an employee which is subject to a benefit-in-kind and was not available during lockdown.
Now could also be the right time to change your company car fleet, with changes to the benefit-in-kind rules meaning that pure electric cars and certain plug-in hybrid cars are a tax-free benefit-in-kind for 2020/21.
And as well as being a very tax-efficient way of remunerating yourself or your employees, purchase of these cars can also qualify for first-year capital allowances.
This means you can deduct the full cost of the car from your business’s taxable profits before calculating any corporation tax due.