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I am after some advice, maybe someone has tried this already?
Having read through other links I too am in the same pain as others in regards to the Company Car BIK and the 25% rule.
My case started last year so it was based on tax year 15/16. The company I worked for had a bumper 14/15 and following the books being audited the owner paid everyone bonuses and I was very fortunate to get a £30k bonus. With my BIK this took my HMRC total to £84.5k (77k before BIK added). I know I am very lucky to be in this position and the owner is very generous.
This tax year just ending my HMRC total will be £76.3k (£67.5k before BIK added). Again a generous bonus of £22k. So goes without saying that this year I was paying CM based on a higher figure than my earnings, This year just started there maybe no bonus and of course CMS are saying I will be paying based on the 15/16 figure that could be almost double my wages.
My ex-wife was surprisingly sensible when we broke up, I managed to take some capital to buy my own place as she agreed that when my two children are with me they needed stability and a home. Of course I have significant costs associated to this while my wife took the family home and the equity and contents. She has a very well paid job in the NHS working part time and also gets my payments plus benefits. The £750 a month i pay her covers her mortgage and bills leaving her with up to 2k in disposable income. Mine is less than this even with my bonus.
I tried to have a sensible discussion with her explaining the ridiculous calculation method, that the BIK added I don't see in my pocket in fact it costs me a fortune through my tax code. Also that shes the benefit of me being successful at work so surely we could still use the CMS calculator but do it on real and current numbers between us. Of course she doesn't want to do this..... I wonder why when its so loaded in her favor?
The only thing I can think is to play the system. A guy at CMS said they could review this years numbers if I sent 3 months payslips showing under the 25% figure. Great. But what happens if I get a bonus again? I was thinking if I deferred that payment till the last month of the tax year having taken as many months as possible at the lesser amount, will they back date payments at the annual review? If the bonus was significant enough to take me inside the 25% allowance I could get some paid straight into my pension? As long as the final HMRC figure took my over the 25% difference to enforce a review? This would then give me a much better starter payment in my annual review and I could then take any future bonuses through my pay packet ensuring it doesn't go 25% over so also pay a lower CMS amount against my earnings? Make the 25% work for the dad??!
I heard horror stories about CMS and didn't realise quite how bad it was. I cant believe the 25% is legally enforceable, nor adding the BIK figure. I would love to use the system to beat them!
Again I appreciate I am in a fortunate position in a lot of ways and will pay my way but for CMS to take money based on wrong inflated figures that I could be using to treat my children is scandalous.
Just a suggestion, but you could pay the bonus into pension. As well as getting tax and NI relief on it, you can then take 25% of the pension as a tax free lump sump once you get to age 55, so you get a lot of tax benefits, and any money put into pension isn't subject to the CMS calculation. If you do think of doing this, with this level of pension contribution, I would definitely get independannt financial advice on this.
Thanks for your advice.
I have considered this and think I will have to to get above the 25% difference. Which then could 'reset' the CMS figure.
I would really like to know what would happen if I could get the CMS figure revised to pay on my basic salary but then took any bonus on month 12?
I would think they would catch up at some point as they can still check HMRC ffigures over the full tax year.
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