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HMRC internal manual

Employment Income Manual

From
HM Revenue & Customs
Updated
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Particular benefits: car parking: fixed penalty notices and fines

A financial penalty for parking a car illegally can be imposed in one of two ways:

  • by fixing a fixed penalty notice to the car, or
  • by handing a fixed penalty notice to a person.

Employer pays for, or reimburses, the cost of a fixed penalty notice

A car used by an employee in the course of his or her work may be owned or leased by the employer or by the employee. In either case it is possible for the car to be registered solely in the employer’s name or solely in the employee’s name or in joint names. The identity of the person in whose name the car is registered has a material effect on the tax consequences if the employer pays, or reimburses the employee for paying, a fixed penalty notice issued while the employee was in charge of the car.

For instance, if:

  • the penalty is fixed to a car registered solely in the employer’s name, and the employer pays the penalty (or reimburses the employee for payment), there are no tax consequences for the employee
  • the penalty notice is fixed to a car registered in the employee’s name the fixed penalty notice may impose a personal liability on the employee. In that case, if the employer pays the penalty direct to the relevant authority it discharges a personal debt of the employee and the payment represents earnings chargeable under Section 62 ITEPA 2003 (see EIM00580 onwards). If the notice does not impose a personal liability on the employee, then the direct payment by the employer of the penalty charge is a benefit to the employee because it prevents a penalty fine being imposed on them. If the employer reimburses the employee for payment of the fixed penalty, the employer’s payment is taxable as earnings within Section 62 ITEPA 2003, or as an expenses payment within Section 70 ITEPA 2003
  • the penalty notice is handed to the employee, but the employer pays the penalty direct to the relevant authority, the payment represents either earnings under Section 62 or a benefit under Section 203, depending on the identity of the registered keeper. If the employer reimburses the employee for payment of the fixed penalty the employer’s payment is taxable as earnings within Section 62, or as an expenses payment within Section 70.

Employer pays, or reimburses the cost of, a fine for failing to pay a penalty

If the fixed penalty notice is not paid within a specified period, a fine equivalent to the penalty plus 50% becomes due. This is charged on the registered keeper of the vehicle. As with the initial fixed penalty notice, if the employer pays the fine (or reimburses the employee for payment), the tax consequences depend on the identity of the person who was liable for payment of the fine:

  • if the fine relates to a penalty notice fixed to a car registered solely in the employer’s name and the employer pays the fine (or reimburses the employee for payment) there are no tax consequences for the employee
  • if the fine relates to a penalty notice fixed to a car registered in the employee’s name and the employer pays the fine direct to the relevant authority, the employer meets a personal debt of the employee. The pecuniary liability principle applies (see EIM00580) and there is a tax charge under Section 62. If the employer reimburses the employee for payment of the fine, the employer’s payment is taxable as earnings within Section 62, or as an expenses payment within Section 70
  • if the fine relates to a notice handed to the employee, and the employer pays the fine direct to the relevant authority, regardless of whether the car is registered in the name of the employee or employer the payment can represent earnings within section 62 or a benefit under section 203, depending on the identity of the registered keeper. If the employer reimburses the employee for the amount of the fine, the employer’s payment is taxable as earnings within Section 62, or as an expenses payment within Section 70.