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Income Tax - very Interesting scenario

Hi to all

Very Interesting question!

A company has a fleet of 20 cars. The insurance cost of each car is £3000 as per fleet insurance. The company thought that If the employees of the company buy the insurances in their own names than the cost of the insurance would be £500 each car. The company would save £2,500 on each car. In the employment agreements, the company has written the condition for the employees to buy the insurances in their own names.

Please give me your thoughts on Tax implications on the following issues,

  1. Are employees liabile for P11D but there is no private use
  2. If company reimburses the insurance cost to the employees
  3. If employees buy the insurances from their pocket

If you have any more questions relevant to the scenario - please discuss.



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16th May 2012 16:33

Nice Try

but insurance can only be bought by the owner of the asset.

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16th May 2012 16:38

agree with roland

The employees need to have an insurable interest which on the face of it they dont


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16th May 2012 16:44

What if they leave....

say they are reimbursed by you for paying for the insurance and then leave after a couple of months - you won't get the refunded/cancelled premium - unless they are very honest!

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16th May 2012 16:56


the insurance will permit private use and so the employees are deemed to be provided with a car for private use even if they make no private use of it - benefit for them and class 1A for you.

It is not clear but I assume each employee is a fleet driver or equivalent making no private use in any event.  Suppose each employee purchased the car in question and became full owners (none of this part ownership nonsense) the company lends them, perhaps through fleet financing, the money to buy the vehicle, and agrees to pay the loan BIK through a PAYE Settlement agreement.  Employees are then reimbursed under the 45p/25p per mile rule and company agrees to buy back the vehicle when employee leaves.

This sort of arrrangement in not uncommon but... my guess is the cost of each employee taking insurance on car used for business purposes will not be far short of £3,000 each...

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By zaidi
16th May 2012 22:37

I appreciate what you said. What is your thought if the employees are reimbursed for the insurance cost by the company and company feels that it should be registered for 'dispension scheme' instead of filing P11ds as there is no private use. For instance if the employees are not reimbursed by the company, they can claim the insurance cost against their employment Income under 'wholly, exclusively & necessarily' concept.

I understand that there are Insurance policy consequences but I'm only considering the tax aspects.

Kind Regards

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16th May 2012 16:58

The starting assumption seems bizarre

Fleet insurance is £3,000/car yet the drivers could do it privately for £500/car?

I'd get a few more fleet quotes. That sounds like nonsense to me.

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16th May 2012 16:58

£3000 per car - find a new broker

Unless your client company has employed blind ex rally drivers either find a new broker, or enforce a rigorous company car policy to cover fault damage.

Also agree that the insurable interest clause will apply.

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16th May 2012 17:38

surely fleet insurance would be cheaper than individual insurnace??? 

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16th May 2012 17:46

What are the cars used for?

The highest insurance I have ever seen included Goods in Transit Insurance. I am curious why it is so high.

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16th May 2012 23:37

Too extreme

My wife insurance her minicab for £1,860 per year. She has had no claims all the time she has owned a car. Minicab insurance is more expensive than normal fleet insurance.

I would think that £3,000 is too much for a fleet car and £500 too little for an individual business car.

I also think the ways you are suggesting to wriggle out of high insurance costs are going to cost you more in the long run.

You should be able to get a much better fleet quote.

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17th May 2012 10:40

no private use.....these

 are pool cars then? (in which case should be available to 'all' and therefore would impact on insurance?!)

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17th May 2012 10:47

I was asked,

by an ex employer, to do this for one of our company drivers, small van, exclusive use, and told him he had no chance.  He insisted that I try and I was amazed when a well known insurance company, with red telephones, said 'Oh yes, we do this all the time.  It's mainly for one man limiteds but that's no problem.'!

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21st May 2012 11:40

Not so

"but insurance can only be bought by the owner of the asset."

Admiral were happy to insure me as policy holder on car registered to my Limited company. Name of registered owner was just noted on policy docs. No additional charge, no fuss.


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21st May 2012 12:12

"but insurance can only be bought by the owner of the asset."
Wrong. What about leased/contract hired cars?

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21st May 2012 12:19

Cheap insurance - multi car policies

Slightly off topic but I thought it might be useful advice for your clients:

I recently received a renewal quote for a Jaguar XK8 4 litre at just under £1000 p.a.  My broker got this down to £640 with Aviva (Norwich Union).  I then enquired about a multi-car policy and the Jag came down to under £400 and similar huge reductions were achieved on my other cars.  All with Aviva!!!!!

The cars are insured for business use but I only claim for business mileage on the advice of my accountant and not car expenses.

I wish I had known about this quirk of car insurance a few years ago when these multi-car policies were introduced.

My broker also advises against insuring a car you do not own/registered in your name, as it can negate your insurance.  Those above who have insured cars not registered to them with Direct Line and Admiral might just check the legality and get it in writing.  My insurance broker was shocked and does not think this is correct cover.  Bu then again he does not deal with one of those companies - he is checking with the other!!!!!!!


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21st May 2012 12:25

leased car

The man with the red telephone was quite happy to insure it with full disclosure having been

made as to the ownership etc

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21st May 2012 12:30

One-man Limiteds - okay

Having read more carefully the above comments about one-man limiteds being able to insure an asset not owned by them but registered to the one-man company, I believe that is far more acceptable to the insurers.  Apologies.

But trying to insure my son on a multi-car policy in my name on his car doesn't work.  And my broker advises a multi-car policy would not work for the type of organisation mentioned in the original question.  They would love to get their fleet insurance and it wouldn't cost anything like £3000/car.

If anyone is in the East Midlands, my insurance broker now specialises in low-cost fleet insurances: AC Insurance of Nottingham.

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