What is car averaging?

In the 2010-2011 tax year, HMRC introduced Car Averaging, which allows employers to create groups of cars based on CO2 emissions, price and fuel type and allocate the employee to a group rather than to a specific car. Further information on this is available on the HMRC website. This article explains how to process this for a P11D.

For some employers (such as car dealerships) employees may have access to a company car, but not a specific car. Keeping records of frequent changes of car creates a considerable amount of work for employers.

If your employees with company cars have specific cars allocated to them, you would not use car averaging.

Setting up Car Averaging

1. Click Payroll, double click P11D Module, double-click General File Maintenance, then click Yearly Constants.
2. Select the tax year at the left by highlighting it.
3. Click the Car Averaging button. This opens a Constants Maintenance screen.
4. To create a new group, click Add . The group will automatically be assigned the next available number.
5. Enter a Description for your group.
6. In the Old Reg column, enter N if the car is first registered on or after 06/04/2020, or enter Y if the car was registered before 06/04/2020.
7. In the Fuel column, enter the letter representing the car fuel type, for example, A.
8. In the CC column, enter the engine size.
9. In the CO2 column, enter the CO2 emissions.
10. In the Miles column, enter the number of miles the car can travel in zero emissions mode on a single charge, for ultra low emission cars (cars with between 1 and 50g/km CO2 emissions). For all other cars, leave this as 0000.
11. In the Price column, enter the list price.
12. Click 
13. Once you have added your groups, click Done.
14. Click Exit 

Creating a "car" to use for Car Averaging

1. Click Payroll, double-click P11D Module, double-click General File Maintenance, then click Cars & Accessories.
2. Click Add 
3. Enter the Car Registration No. as AVECAR
4. Tick the Car Group box. The Registration Date and Make will be automatically populated.
5. Click 
   You only need to set up one car to use the car averaging scheme. If you try to set it up a second time you will get a message, "A car with this registration number already exists".

Attaching a Car Averaging record to an employee

1. Click Payroll, double-click P11D Module, then click Employee Benefit Details.
2. Click the Cars tab.
3. Click Add 
4. Click in the Registration Number box and use the Lookup  to select AVECAR
5. Click in the Group Code box and use the Lookup  to select the Group Code for the car type you wish to add.
6. Enter the correct Issue Date and Returned Date - returned date will be the last day of the tax year if the employee is still part of the scheme.
7. Enter any Capital Contributions, Private Use and Car Foregone amounts as required.
8. If Fuel is Provided, enter Yes in the Fuel Provided box. The fields below become available and you can enter any further details required.
9. Click Save