For a company car to be treated as shared, the following criteria needs to apply:
- the car is available to more than one employee concurrently
- the car is made available by the same employer
- the car is available concurrently for each employee’s private use
- 2 or more of those employees are chargeable to tax for that year
If the above conditions are met, then a P11D would need to be submitted for each employee who is sharing the car.
To work out the benefit of the car to each employee, the below steps need to be followed:
- Calculate the cash equivalent of the benefit of the car as though each employee had exclusive use (S121 ITEPA 2003)
- Reduce the benefit on a just and reasonable basis by calculating the benefit on a pro rata basis depending on which employee used the car the most (S148 ITEPA 2003)
Without the intervention of S148 ITEPA 2003, each employee would be likely to be chargeable on the whole cash equivalent of the car. This would mean one car, but more than one charge. It would also mean that employees who received only a partial benefit of the car would be charged as though they had exclusive use of the car.
Further guidance can also be found in EIM25200.
When reporting the car on the P11D, the reduced benefit figure needs to be entered into the cash equivalent or relevant amount for each car box and in the total cash equivalent or relevant amount of all cars made available box (Box 9). Check to make sure the reduced benefit cash equivalent figures add up to the total cash equivalent for that car.
HMRC’s online filing system for forms P11D is known to mishandle the treatment of shared cars, often resulting in a full car benefit for each employee. In such cases, HMRC acknowledge that paper forms P11D should be submitted – see “reporting by post”. An explanatory letter should also be submitted with the paper forms explaining:
- Why paper forms are being submitted – here because of a shared company car.
- That the dates the car was made available have been left blank on the forms P11D.
- Details of the car sharing including the basis on which the sharing apportionment has been calculated.
The address to send the paper form P11D to is shown at the foot of the form P11D on GOV.UK
If a reduction is made to an employee’s car benefit under S148 ITEPA 2003, a corresponding reduction is also made to their car fuel benefit under S153 ITEPA 2003, see EIM25575 for further guidance.
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