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Company Cars

Aside form the immorality of having a BIK of 21,270 on a car that only cost the company 19,000, what would the employee need to pay to the company to extinguish this (in the absence of detailed mileage logs)?

A, The costs incurred by the company, or

B, The value of the BIK?

The vehicle was bought cash initially in 2008/09, but has been financed to help cash flow during 2009/10.

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unless

the rules have changed the BIK is based on cost new less capital contribution by the employee but up to maximum of £5000. Thus the BIK would appear to be based on £16270 plus fuel if relevant.

Can't they refinance in the name of the employee and use the AMR to fund all costs including finance or is the business mileage too low ? This is the usual equation that has to be judged case by case.

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Revenue guidance on payments for private use

http://www.hmrc.gov.uk/manuals/eimanual/EIM24000.htm

Step 8 advises on how the BIK can be reduced by payments made by the employee for private use.

Basically it confirms your option B is correct.

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Solution?

With that being the case I would strongly suggest selling the vehicle to the employee as the market value should be much lower now. In fact making a gift on which a benefit would arise under the assets transferred would actually have a lower tax cost.

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Typical case

Costs and hassle of re-financing considerable, all tied up with other issues, and still have to get the funds to pay the finance, The bigger the car, the less the business mileage! Also the usual problem that very hard to get go getting entrepreneurs to keep mileage logs in any case.

This really is the most ludicrous tax law we have. We really need to be looking at company car benefit as a profession and getting on to the treasury about it. I don't have a problem with people being taxed on the benefit they receive, and where it is a new "perk" car on finance I still think it is better to have as a company car,  but if it is a second hand car the current system is grossly unjust and where a second hand vehicle is purchased, it is just plain wrong to base the benefit on the original list price.

As for the fuel benefit, most people don't have a total annual fuel bill as big as the private use charge! As ever just another money raiser for HMRC, nothing to do with taxing the benefit received.

 

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