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HMRC miscalculates the BiK tax and Class 1A NIC due on zero emission company cars

Recently the Institute of Chartered Accountants in England and Wales (“ICAEW”) published an article highlighting that some members have reported that HMRC’s systems have incorrectly interpreted its online Form P11D, which has led to HMRC incorrectly calculating the Benefit in Kind (“BiK”) for zero emission electric cars.

When reporting the benefit of a zero-emission electric car on Form P11D the approved CO2 emissions figure would be 0 g/km, and the type of fuel or power used would be denominated as letter “A”. However, it seems that when such a car is reported using HMRC’s own online Form P11D, it may be incorrectly categorised as a high CO2 petrol car and allocated a BiK (Benefit in Kind) percentage of 37%, which is then uses to calculate the BiK.

As this may result in employees paying too much BiK tax and employers’ Class 1A NIC being similarly inflated, the ICAEW has urged employees and employers to check that tax and NIC calculations for 2021/22 correctly reflect the actual BiK% which should be 1% of the P11D value, and that tax codes for 2022/23 calculate the company car benefit as 2% of the P11D value.

The ICAEW is therefore recommending that employers either use their own payroll software that supports the reporting of zero emission electric cars or reports the benefit using a paper form P11D.

Although the ICAEW has made representations to HMRC, at present it seems the only way to correct this error is for employees and employers, or their agents, to phone HMRC:-

  • HMRC employer helpline – 0300 200 3200
  • HMRC general helpline – 0300 200 3300

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