Company Car tax
Discussion
I don't run a company car and don't want one, I find it much more profitable to claim mileage. One of our salesmen needs a car and currently claims mileage on circa 30,000 miles per year, which I think is a pretty good deal for him. However, he wants a company car and is insistent that he won't be using it for any personal use so doesn't want to pay any tax. To make it more difficult, he works from home so would park the car outside his house not at our works premises.
I don't care if he gets a company car, and also don't care if he does or doesn't pay tax, but is it possible for him (and hence me) to prove to the satisfaction of HMRC that there is no private use? If it all goes tits up does he get into trouble or does the Company?
Taking a risk for my personal gain is one thing, but I will be buggered if I am taking a risk for someone else's.
I don't care if he gets a company car, and also don't care if he does or doesn't pay tax, but is it possible for him (and hence me) to prove to the satisfaction of HMRC that there is no private use? If it all goes tits up does he get into trouble or does the Company?
Taking a risk for my personal gain is one thing, but I will be buggered if I am taking a risk for someone else's.
10 Pence Short said:
Could you class it as a pool car instead?
No, if it isn't used for personal purposes then no tax is payable, the difficult thing is proving it to the satisfaction of HMRC.
For a car to be classed as a pooled car there are 5 criteria which must be met, and one of them is that the car musn't be parked overnight at or near the home residence of the employee.
Eric Mc said:
The rules talk of "availablilty for private useage". The Benefit in Kind is taxable whether there is any genuine private useage or not. The fact that the car was available is all that matters.
The factsheet on the HMRC website
www.hmrc.gov.uk/cars/company-cars-factsheet.pdf
states:
'What if I only use the car for work journeys?
If the only journeys you are permitted to make in the car are work journeys - for example, making calls to customers - there is no tax charge unless you actually use it for other, private, purposes as well.'
There is no mention there of it being merely available, is that condition stated elsewhere? And if so, where?
edited to make a bit clearer
Edited by david_s on Friday 16th February 18:07
Try looking up the actual legislation rather than HMRC Fact Sheets. The legislation is far more prescriptive.
If an employer makes a car avalaible to an employee between certain dates and within those dates the employee COULD have used the car for private journeys, then a BIK will be automatically triggered - unless the empoyer can prove that not a single private journey was made between those dates. Taking the car home on only one occasion would be sufficient for the BIK to be charged.
The Form P11d (the form in which the employer notifies the Revenue of ALL benefits received by employees in the tax year) specifically requests the dates between which a car was "made avialable" to an employee.
If an employer makes a car avalaible to an employee between certain dates and within those dates the employee COULD have used the car for private journeys, then a BIK will be automatically triggered - unless the empoyer can prove that not a single private journey was made between those dates. Taking the car home on only one occasion would be sufficient for the BIK to be charged.
The Form P11d (the form in which the employer notifies the Revenue of ALL benefits received by employees in the tax year) specifically requests the dates between which a car was "made avialable" to an employee.
Edited by Eric Mc on Friday 16th February 21:22
Eric Mc said:
If an employer makes a car avalaible
As I understand it, the 'trick' there is for the employer to make the car unavailable for private use. Ideally write it into the employees contract that the car must not be used other than on company business, and even possibly arrange the insurance to the same effect.
Of course the downside is that the employee then really must not use the car for any private use whatsoever.
The same 'fact sheet' quoted above goes on to say:
'How can I show there is no other private use?
Your employer must be able to show to HM Revenue & Customs that you do not have to pay tax. This means that you could be asked to:
Keep mileage records
Sign an agreement about the use of the car
Have the use of the car put into a contract of employment'
I fully understand Eric's point about availablity for use leading to the BIK and would have given up already if the quotes I have listed were not taken direct from an HMRC publication on the HMRC website, can they be so wrong? Everyone I know who has a company car pays tax unless it is a) a pool car, b) a 'commercial' vehicle or c) actually their own car funded by mileage payments. Before I refuse the employee's request I will speak to HMRC directly, and I am sure that he will do the same. I suppose I should also get some paid for advice from our accountant.
What I can't understand is why he wants a company car rather than a mileage payment, the mileage payment (£0.40 for 1st 10,000 and £0.25 thereafter) should be a better option for him than a company car, regardless of tax, as he only stands to get a diesel Mondeo or similar. I take a mileage payment and I claim a lot less than 30,000 miles per year.
I'm not doubting your advice Eric, you will be right of course, but I do have to go through the motions before rejecting the request.
'How can I show there is no other private use?
Your employer must be able to show to HM Revenue & Customs that you do not have to pay tax. This means that you could be asked to:
Keep mileage records
Sign an agreement about the use of the car
Have the use of the car put into a contract of employment'
I fully understand Eric's point about availablity for use leading to the BIK and would have given up already if the quotes I have listed were not taken direct from an HMRC publication on the HMRC website, can they be so wrong? Everyone I know who has a company car pays tax unless it is a) a pool car, b) a 'commercial' vehicle or c) actually their own car funded by mileage payments. Before I refuse the employee's request I will speak to HMRC directly, and I am sure that he will do the same. I suppose I should also get some paid for advice from our accountant.
What I can't understand is why he wants a company car rather than a mileage payment, the mileage payment (£0.40 for 1st 10,000 and £0.25 thereafter) should be a better option for him than a company car, regardless of tax, as he only stands to get a diesel Mondeo or similar. I take a mileage payment and I claim a lot less than 30,000 miles per year.
I'm not doubting your advice Eric, you will be right of course, but I do have to go through the motions before rejecting the request.
Edited by david_s on Friday 16th February 22:54
I do know someone who did this, although it was quite a few years ago. He worked for a big company though (ICI) who may well have a bit more clout with the tax man than a smaller company.
I know this is an area that gets very complicated, if not impossible, for Directors (as it's considered that they can might make up their own rules) but for an employee is shouldn't be such an issue.
On the 'cash or car' issue, I was pretty reluctant as an employee when we were pushed very firmly out of our company cars. I too was doing 30K+/yr, and I really didn't fancy putting that kind of mileage on a car that I owned myself. Plus having to sometimes park in layby's all day, leave it in dodgy hotel car parks etc.
Several of our guys went for personal contract hire, but at 30K/yr, full maint & insurance, plus things like redundancy and resignation insurance (which of course you have by default with a company car) then they were no better off. And you have to carry the risk of incidental damage like car park dents and foglights smashing etc.
I know this is an area that gets very complicated, if not impossible, for Directors (as it's considered that they can might make up their own rules) but for an employee is shouldn't be such an issue.
On the 'cash or car' issue, I was pretty reluctant as an employee when we were pushed very firmly out of our company cars. I too was doing 30K+/yr, and I really didn't fancy putting that kind of mileage on a car that I owned myself. Plus having to sometimes park in layby's all day, leave it in dodgy hotel car parks etc.
Several of our guys went for personal contract hire, but at 30K/yr, full maint & insurance, plus things like redundancy and resignation insurance (which of course you have by default with a company car) then they were no better off. And you have to carry the risk of incidental damage like car park dents and foglights smashing etc.
Eric Mc said:
Try looking up the actual legislation rather than HMRC Fact Sheets. The legislation is far more prescriptive.
If an employer makes a car avalaible to an employee between certain dates and within those dates the employee COULD have used the car for private journeys, then a BIK will be automatically triggered - unless the empoyer can prove that not a single private journey was made between those dates. Taking the car home on only one occasion would be sufficient for the BIK to be charged.
The Form P11d (the form in which the employer notifies the Revenue of ALL benefits received by employees in the tax year) specifically requests the dates between which a car was "made avialable" to an employee.
If an employer makes a car avalaible to an employee between certain dates and within those dates the employee COULD have used the car for private journeys, then a BIK will be automatically triggered - unless the empoyer can prove that not a single private journey was made between those dates. Taking the car home on only one occasion would be sufficient for the BIK to be charged.
The Form P11d (the form in which the employer notifies the Revenue of ALL benefits received by employees in the tax year) specifically requests the dates between which a car was "made avialable" to an employee.
Edited by Eric Mc on Friday 16th February 21:22
I have spoken to HMRC (at length) and they have agreed that no tax will be payable if:
1. I write into the employee's contract that no personal car use is allowed (thus making the car unavailable for personal use) and,
2. Confirm that there is no personal use by asking the employee to log every business trip and comparing said log against the mileometer.
If I confirm the contents of my various conversations with them in writing (and I was completely honest with them for a change), they will confirm in writing that no tax is payable. They were actually very reasonable about the whole thing, I was surprised.
No need for them NOT to be reasonable.
Off course, you must keep to your end of the bargain and ensure that at no point, ever, is the car made available to that (or any other) employee for non-business related journeys.
You have, in fact, decided that the car is a "Pool Car" which is a totally acceptable method of ensuring that no Benefit in Kind arises in respect of that vehicle.
Off course, you must keep to your end of the bargain and ensure that at no point, ever, is the car made available to that (or any other) employee for non-business related journeys.
You have, in fact, decided that the car is a "Pool Car" which is a totally acceptable method of ensuring that no Benefit in Kind arises in respect of that vehicle.
david_s said:
Eric Mc said:
Try looking up the actual legislation rather than HMRC Fact Sheets. The legislation is far more prescriptive.
If an employer makes a car avalaible to an employee between certain dates and within those dates the employee COULD have used the car for private journeys, then a BIK will be automatically triggered - unless the empoyer can prove that not a single private journey was made between those dates. Taking the car home on only one occasion would be sufficient for the BIK to be charged.
The Form P11d (the form in which the employer notifies the Revenue of ALL benefits received by employees in the tax year) specifically requests the dates between which a car was "made avialable" to an employee.
If an employer makes a car avalaible to an employee between certain dates and within those dates the employee COULD have used the car for private journeys, then a BIK will be automatically triggered - unless the empoyer can prove that not a single private journey was made between those dates. Taking the car home on only one occasion would be sufficient for the BIK to be charged.
The Form P11d (the form in which the employer notifies the Revenue of ALL benefits received by employees in the tax year) specifically requests the dates between which a car was "made avialable" to an employee.
Edited by Eric Mc on Friday 16th February 21:22
I have spoken to HMRC (at length) and they have agreed that no tax will be payable if:
1. I write into the employee's contract that no personal car use is allowed (thus making the car unavailable for personal use) and,
2. Confirm that there is no personal use by asking the employee to log every business trip and comparing said log against the mileometer.
If I confirm the contents of my various conversations with them in writing (and I was completely honest with them for a change), they will confirm in writing that no tax is payable. They were actually very reasonable about the whole thing, I was surprised.
I also noted from a seminar that the insurance of the vehicle was a VERY valid point, in addition to the above, ensure that it's only insured for business use. (which in turn will probably increase the premium)
Still, I would imagine a fine line.
Eric Mc said:
No need for them NOT to be reasonable.
Off course, you must keep to your end of the bargain and ensure that at no point, ever, is the car made available to that (or any other) employee for non-business related journeys.
You have, in fact, decided that the car is a "Pool Car" which is a totally acceptable method of ensuring that no Benefit in Kind arises in respect of that vehicle.
Off course, you must keep to your end of the bargain and ensure that at no point, ever, is the car made available to that (or any other) employee for non-business related journeys.
You have, in fact, decided that the car is a "Pool Car" which is a totally acceptable method of ensuring that no Benefit in Kind arises in respect of that vehicle.
No, the car cannot be a pool car because for the car to be acceptable as a pool car it must be available to all employees, not used by one employee to the exclusion of all others, and not parked at or in the vicinity of the home address of the employee. This employee works from home, 200 miles away from the other employees and the car will be parked outside his house. So a pool car is not an option.
The car is a company car, issued to a specific employee and used for business use only. HMRC recommended that I write business use only into his contract and check his submitted mileage logs against the mileometer, if I do those things then I am covered and any use outside of those terms become the employee's problem, not mine.
i do similair mileage to him and found it better to have full company car with persoanl usage tax, get stung for it and assume fuel already paid and so have to get my money's worth 
but on the up side, a stone took out the A/C gas and was promptly fixed, along with a stuck bonnet release lock, any major problem is taken care of, the allowance to get own choice of car seemed a worse deal and had to payfor any repairs as well
but on the up side, a stone took out the A/C gas and was promptly fixed, along with a stuck bonnet release lock, any major problem is taken care of, the allowance to get own choice of car seemed a worse deal and had to payfor any repairs as well
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