Company Car Reporting - Reduction in P46(Car) reporting requirement

Written by Ian Congreave - Filed under: Cars and car fuel (F) on March 23rd, 2009

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From the start of the 2009/10 tax year, the reporting requirement for form P46(Car) Car provided for the private use of an employee or a director is being relaxed so that it must only be completed quarterly by employers when

a car is provided for the first time, or
a second car is provided, or
a car ceases to be provided without being replaced.

Starting with the form that would otherwise be due on 7 July 2009, the form will no longer be required when an existing car is replaced with another car.

The change is prompted, according to an Impact Assessment document issued by HMRC, by employer irritation over having to report information twice – on form P11D at the end of the tax year and on form P46(Car) quarterly – and over delays in HMRC processing of P46(Car) forms that are submitted on paper rather than online.

Form P46(Car) was originally introduced to reduce the likelihood of large underpayments of tax where the provision of a new car was reported on form P11D many months after it was first provided, and large overpayments of tax where the withdrawal of a car was similarly reported many months after the event.. Form P46(Car) allows appropriate tax code changes to be made mid-year, thereby reducing the tax impact on the employees concerned.

The Impact Assessment explains that the option to abolish the form altogether had been considered but rejected. It would mean a return to the significant tax underpayments and overpayments that occurred before it was introduced. Instead, by removing only the requirement to submit the form for changes of car, the scale of any increase or decrease in tax liability will, in most cases, be only marginal and the adjustment to the employee’s tax code can be made in the following tax year, following receipt of the P11D.

HMRC received approximately 400,000 forms P46(Car) in 2005/06, the latest year for which data is available. Of this number, around 43% related to notifications of changes to a company car where one taxable car is replaced with another. The cost burden on employers of completing form P46(Car) currently is estimated at £2.6 million annually (i.e. £6.50 per form) and the change is expected to reduce this by £1.1 million.

Further information:
Impact Assessment: Amendment of employer reporting requirement on form P46(Car)

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Written by Ian Congreave -

Filed under: Cars and car fuel (F) on March 23rd, 2009