Overview
Company Cars covers situations where an employer provides an employee with a car for private use. Where the company car is not used for private use, then no taxable benefit arises. The taxable benefit arises from the cash equivalent value of the car, calculated based on the vehicle’s list price, CO₂ emissions, and fuel type, in accordance with HMRC rules.
Within the BIK Module, this benefit type is managed through a single Event Type:
Automatically Handled — the system calculates and applies the cash equivalent value, generating a taxable benefit subject to Income Tax and Class 1A National Insurance.
The benefit is payrolled across the tax year for Income Tax purposes, with employer-only Class 1A NIC reported via P11D(b) at year-end.
For detailed guidance on calculation rules, CO₂ bands, and exemptions, see GOV.UK: Company Cars.
This article explains how these events should be applied with BIK module considerations and how to calculate the benefit value. See below for some other articles to assist with preparing and processing benefits in the BIK module:
- For creating this benefit type at company level, go to Configuring Company Benefits
- For creating Vehicle records directly connected to this benefit type, go to Vehicle Management
- For applying benefits to employee records, go to Applying Benefits to Employees: Manual & Data Imports
- For how this looks in Payroll when processing, go to How Payrolled Benefits are Reflected in Payroll
- For National Insurance and Best Practices, please read the National Insurance and Income Tax Handling for Payrolled Benefits article
Contents
BIK Module Configurations and Considerations
The Company Cars benefit type is fully automated within the BIK Module, requiring minimal input from users to calculate and payroll the benefit. Once the vehicle and employee details are configured, the system calculates the cash equivalent value based on HMRC rules and applies the appropriate Income Tax and Class 1A National Insurance automatically.
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Company Benefit Configuration:
The Company Car and Car Fuel benefit must be created at company level first, before it can be applied to employees.
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Vehicle Management functionality:
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Vehicles can be configured and stored in the system with all relevant details required for the BIK calculation, including:
List price
Fuel type
CO₂ emissions
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The module provides a bespoke UI for processing both the Company Car Benefit and, if applicable, the Car Fuel Benefit at the employee level.
This approach allows the BIK Module to automatically calculate the taxable cash equivalent and manage payrolling across the tax year, while generating the correct Class 1A NIC for reporting on P11D(b).
Event Type: Automatically Handled
This Event Type applies when an employee is provided with a company car for private use. The taxable benefit is the cash equivalent value of the car, calculated automatically by the BIK Module using the vehicle’s:
List price
Fuel type
CO₂ emissions
Time employee has the car
Whether Car Fuel (Free Fuel) is included in or not
The system then applies Income Tax payrolled across the year and Class 1A National Insurance at year-end via P11D(b).
Income Tax Liability |
National Insurance Liability |
Payrolled, across the Tax Year |
Class 1A (Employer Only), P11D(b) |
Working out the Taxable Amount
The BIK Module will automatically calculate the benefit value and cash equivalent based on HMRC Rules and the information applied when creating a Vehicle in Vehicle Management.
Identify the car’s list price, including optional extras and additional accessories
Deduct any Capital Contributions (Maximum: £5000) an employee makes toward the purchase of a vehicle
Determine the CO₂ emission band for the car
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Apply the appropriate percentage rate based on the CO₂ band and fuel type to the cars List Price to gauge the cash equivalent
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Pro-rate the cash equivalent based on the number of days the employee has access to the car:
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Calculate Car Fuel Benefit (if fuel for private use is provided) separately:
Multiply the car fuel multiplier by the appropriate percentage rate from step 3
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Please Note:
The Car Fuel Benefit is not prorated based on the number of days the employee has access to the car.
If free fuel is withdrawn and not reinstated during the tax year, the cash equivalent of Free Fuel can be prorated for the period without fuel
If free fuel is reinstated at any point during the tax year, the full Car Fuel Benefit applies for the entire tax year, regardless of the period it was temporarily withdrawn
Furthermore, if an employee is to make good on the Car Fuel amount ,then they must make good on all of it, or none of it
Combine the car and fuel amounts to determine the total taxable cash equivalent
Deduct any Employee Contributions the employee makes for private use
Simply add the Car Benefit and vehicle in the employee record in the BIK Module; the system will then calculate the Cash Equivalent and apply Income Tax payrolled across the year and Class 1A NIC at year-end via P11D(b)
For example:
Employee and Vehicle Details:
Car List Price: £30,000 (including optional accessories)
Employee Capital Contribution toward car purchase: £3,000
CO₂ Emissions: 120g/km
Fuel Type: Petrol
Percentage rate for CO₂ band: 30%
Free fuel provided for private use
Step 1: Adjust List Price for Capital Contribution
£30,000 − £3,000 = £27,000 (adjusted list price)
Step 2: Calculate Car Cash Equivalent
£27,000 × 30% = £8,100
Step 3: Pro-rate Car Cash Equivalent (if applicable)
Jane temporarily loses access to the car for 20 days (less than 30 days)
Pro-rated Car Cash Equivalent = Remains £8,100
Step 4: Calculate Car Fuel Benefit
Official fuel multiplier (example): £28,200 × 30% = £8,460 (full-year cash equivalent for fuel)
Free fuel was available for the full year, so no pro-rating is applied
Step 5: Combine Car and Fuel Benefits
£8,100 (Car) + £8,460 (Fuel) = £16,560
Step 6: Deduct any Employee Contributions for Private Use
Employee contributes £0 for private use
Total taxable benefit = £16,560
Step 7: Record in BIK Module
Enter Car and Fuel Benefit in the employee record
BIK Module calculates the Cash Equivalent automatically
Income Tax is payrolled across the year
Class 1A NIC is applied at year-end via P11D(b)
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