Extras on company car question

Fluke?

Fluke?

Fluke?

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Hi guys,
so the missus has a new job that comes with a company car, which means my quest for something a little sporty as our next car is out of the window, but the flip side is we get a brand new car to play with for the first time ever.*

Anyway.. I'm a bit confused about the P11D and extras bit. Here is the situation:

Max p11d value is £21.1k with the option to pay for extras up to £1k over the period of the year.
Car choice #1 is £20k with the extra (different colour paint) at £500
Car choice #2 is £21k (next trim level up) with the extra paint at £500 - so over the max p11d allowance by £400.

Apparently the fleet manager has said that if she went with option 1 the extra will just be sucked up in the allowance and will just be taxed on the total £20.5k.

So far so good.

For the second option though they are saying that because it's above the allowance she would need to pay the full £500, PLUS the total cost including the extra will be part of the p11d, meaning taxed for the full £21,500.

This confuses me on two levels as
i) If on the first option the extra is sucked up by the allowance then why is the first £100 of the extra not sucked up in the second option to essentially "max out" the allowance?
ii) Is it really the case that she would have to pay tax on the full amount of £21,500 even though she's already paying the £500 out of her own pocket? Surely you should be taxed on the the part of the car that the company is paying for and not be taxed on something you've already paid for??

TLDR
If you pay for the cost of an extra on a company car should you still be taxed for the full amount, including the extra??

Sorry if I'm being wishy-washy as usual but any input would be really appreciated! :)



*yes I have checked that I can drive it too...
 
Is she paying the £500 straight up or are they deducting it from her wages via salary sacrifice?

If she has to pay £500 straight up for the second option they should report that in her P11D. There is an option for employee contributions - this would reduce the taxable value. If they are doing it via salary sacrifice then my understading is they will have to report the £21500 as she is not being taxed on her contribution.
 
The fact it states "option to pay for extras up to £1k over the period of the year" implies to me that it probably isn't an up front payment, but needs clarification.
I'd just get #2 without the paint as it is a company car so you don't really want to be whacking down extra money out of your own pocket for a car that may not be kept that long.
 
She will have to pay tax on the full value of the car regardless, however part of the form that will be sent in from the company will state that she makes (or has made) a contribution towards the car so that will reduce the tax liability.

It's way more complex than it needs to be, but hey ho, we have a ton of civil servants that need to be kept busy with make work!
 
As exciting as the new car prospect is, it's always worth double checking what you might lose out on in terms of allowances etc.

There are many factors to consider in terms of risk (i.e. no commitment to a company car, no worries about dumping 400,000 miles on it etc.) but you may find the financials don't stack up quite as well as they first appear.

Plenty of people at my workplace who at first glance think 'wow, an Audi A4 for just £150 in tax!!!' and fail to consider they'd be losing several hundred quid from their payslip too by losing their car allowance.
 
Thanks for the replies chaps.
It really does seem more complicated that it could be! Having looked at the options a bit more I think the best option is actually to go with the lower spec car but we can stick on a couple of extras that we want from the higher spec and keep it under the threshold.

Oh, and sadly the way this scheme works she doesn't have the car allowance option. It's company car or nought. £300 odd to spend would net something a little more exciting than a 1.5 Megane!
 
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