A LATE flood of interest in vehicle carbon dioxide emissions has fuelled fears that thousands of company car drivers could be underpaying or overpaying benefit-in-kind tax in the 2002/03 financial year.

Staggering statistics from the Society of Motor Manufacturers and Traders indicate millions of employers or company car drivers left it to the last minute before checking car CO2 emissions for tax codes for the new tax year. The SMMT website holds the CO2 emissions of cars registered between January 1, 1998 and October 31, 2000, that do not have their CO2 emissions printed on their official V5 registration document. In February, the website received 86,300 requests for CO2 data. In March, that figure rose to 2.7 million requests.

Unless this information was supplied at the last minute to the Inland Revenue, many company car drivers may not realise the full impact of the new emissions-based benefit-in-kind tax system until the late summer or autumn of 2003.

The Revenue requested twice that employers should submit the carbon dioxide emissions of their fleet cars, but by the end of last year only about 10% of firms had complied. This prompted the taxman to request the data directly from company car drivers.

However, only in July 2003 will the Revenue have statutory powers to demand this data when employers file P11d tax returns for their staff.

The Revenue will then cross-refer P11d data against employee PAYE tax codes to verify that employees have paid the correct amount of tax.

Alastair Kendrick, tax partner at Ernst & Young, warned that if the Revenue had issued tax codes for the 2002/03 financial year based on its best estimates of car CO2 emissions (because it had not received accurate data from driver or employer), then next autumn many employees may find they are in line either for a tax rebate for overpaid tax, or more worryingly a tax bill for underpaid tax.

Mary Sullivan, Inland Revenue policy adviser, said: 'Because tax codes are issued at local Inland Revenue offices, centrally we do not know how many firms or people have supplied us with the information. If people are concerned they should contact their local tax office.'

She added that the Revenue was keen to avoid any drivers underpaying or overpaying tax, but said there could be many cases where drivers should be paying less tax in 2002/03 because they have moved into a low emission car but not told their tax office.