By Graham Whitehouse | 31 January 14 | In: P11D News
With such a wide range of customers, we get involved with many interesting areas of benefits in kind reporting, and although not that common, the area of ‘Flash Lights’ sometimes comes up. Therefore, here are a few notes about those people that have blue (or orange) lights on their vehicles.
The first key point is to establish whether the vehicle should be regarded as a ‘car’ for tax purposes. This should be fairly clear, as if the car is fitted with FIXED flashing lights which are bolted or screwed in place, then it is NOT a car for tax purposes.
For clarification, it is not important what colour the lights are or where they are placed on the car, but they must be fixed – magnetic lights and removable ones do not count! If the car falls into this ‘flash light’ category, the car then needs to be treated as an “An asset placed at the employee’s disposal” and entered in Section L on the P11D.
When entering items into this area of the P11D, one does not use the manufacturer’s list price as you would with a company car, but the ‘market value’, which would normally be the price paid to acquire the car. The cash equivalent is then determined by applying the formula supplied by HMRC, which is 20% of the market value of the asset at the time that the employee first uses it plus any running costs (insurance, fuel etc.). If the car was leased rather than purchased, then the annual lease cost should be used in place of the market value.
The resulting value can be subsequently ‘apportioned’ to take account of private and business use, providing sufficient records are maintained.
So as an example: A fire brigade car with fixed blue lights that cost the brigade £24,300, and provides other costs of £2,500. The entry in Section L of the employee’s P11D should be £5,360. If there is evidence of a 60%/40% private/business split, this could be further reduced to £3,216.