Processing car and fuel benefit through payroll

Once the car and/or fuel benefit calculates, the payroll software automatically creates a notional payment for you and allocates it to the relevant employee records. IRIS Earnie IQ takes the calculated benefit for an employee and splits it into a periodic ‘payment’, depending on the number of pay periods left in the tax year. When the payroll process completes, the amount adds to the employee's taxable pay (but not paid to the employee), and the tax on the employee's benefits is then deducted.

IRIS Earnie IQ uses a cumulative calculation, similar to calculating tax. The remaining benefit for the year is divided by the number of payments remaining. This then provides the amount to pay in this period.

Example

You allocate a car in Month 1 to a monthly-paid employee with a car benefit cash equivalent of £1,200.

In Month 1, the full amount is remaining, and the number of periods remaining is 12.

Payroll makes the following calculation: £1,200/12 = 100.

The employee’s taxable pay is increased by £100.

In Month 2, the outstanding benefit amount is £1,100 and the number of periods remaining is 11.

Payroll makes the following calculation: £1,100/11 = 100.

The employee’s taxable pay is again increased by £100.

Multiple car allocations merge into a single Car Benefit payment. If you advance holiday for an employee, the benefit amount will multiply by the number of periods paid.