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HMRC's Employment Income Manual and National Insurance Manual give guidance on the tax and NICs liabilities that arise when an employer pays fixed parking penalties and parking fines.
The liabilities in the different situations depend on three factors:
- the person in whose name the car is registered,
- who is liable for the fine, and
- the means by which the employer pays the fine.
Parking - fixed penalty notice
When a penalty is incurred because a car is parked illegally, the fixed penalty notice may be
- affixed to the offending car, or
- handed to the driver.
However, a fixed penalty notice is not treated as creating a pecuniary liability on the registered owner of the car. It is not a fine on the person in whose name the car is registered.
- The fixed penalty notice is affixed to the car
- The car is registered in the employer's name: If the employer pays the penalty, or if the employee pays the penalty and is reimbursed by the employer, there is no tax liability on the employee.
- The car is registered in the employee's name: If the employer pays the penalty direct, there is a benefit to the employee that is reported in section N of form P11D. The employer has a subsequent liability for Class 1A NICs.
If the employee pays the penalty and is reimbursed by the employer, the amount of the reimbursement is liable for PAYE tax and Class 1 NICs through the payroll. It may alternatively be treated as expenses and reported in section O of form P11D or in section A(1) of form P9D; however there is still a liability for Class 1 NICs at the time of reimbursement.
- The fixed penalty notice is handed to the employee
- The car is registered in the employer's name or the employee's name: If the employer pays the penalty direct, there is a benefit to the employee that is reported in section N of form P11D. The employer has a subsequent liability for Class 1A NICs.
If the employee pays the penalty and is reimbursed by the employer, the amount of the reimbursement is liable for PAYE tax and Class 1 NICs through the payroll. It may alternatively be treated as expenses and reported in section O of form P11D or in section A(1) of form P9D; however there is still a liability for Class 1 NICs at the time of reimbursement.
Parking - fine for non-payment of a fixed penalty notice
If a fixed penalty notice is not paid by the due date, a fine is imposed against the person in whose name the car is registered. Unlike a fixed penalty notice, a fine creates a pecuniary liability on the registered owner of the car.
- The original fixed penalty notice was affixed to the car
- The car is registered in the employer's name: If the employer pays the fine, or if the employee pays the fine and is reimbursed by the employer, there is no tax liability on the employee.
- The car is registered in the employee's name: If the employer pays the fine direct, the employer settles a personal debt of the employee. The benefit is reported in section B of form P11D or in section A(2) of form P9D and a liability for Class 1 NICs arises at the time of the payment.
If the employee pays the fine and is reimbursed by the employer, the amount of the reimbursement is liable for PAYE tax and Class 1 NICs through the payroll. It may alternatively be treated as expenses and reported in section O of form P11D or in section A(1) of form P9D; however there is still a liability for Class 1 NICs at the time of reimbursement.
- The original fixed penalty notice was handed to the employee
- The car is registered in the employer's name or the employee's name: If the employer pays the fine direct, the employer settles a personal debt of the employee. The benefit is reported in section B of form P11D or in section A(2) of form P9D and a liability for Class 1 NICs arises at the time of the payment.
If the employee pays the fine and is reimbursed by the employer, the amount of the reimbursement is liable for PAYE tax and Class 1 NICs through the payroll. It may alternatively be treated as expenses and reported in section O of form P11D or in section A(1) of form P9D; however there is still a liability for Class 1 NICs at the time of reimbursement.
Speeding fine
A fine for speeding is always imposed against the driver of the car. The person in whose name the car is registered is not significant.
If the employer pays the fine direct, the employer settles a personal debt of the employee. The benefit is reported in section B of form P11D or in section A(2) of form P9D and a liability for Class 1 NICs arises at the time of the payment.
If the employee pays the fine and is reimbursed by the employer, the amount of the reimbursement is liable for PAYE tax and Class 1 NICs through the payroll. It may alternatively be treated as expenses and reported in section O of form P11D or in section A(1) of form P9D; however there is still a liability for Class 1 NICs at the time of reimbursement.
...back to 28 September 2006
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For Payroll and Human Resource Professionals
