Benefit in kind on company car

Benefit in kind on company car

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I am dealing with a company director who drives around 100,000 miles each year, selling and delivering his product. He has a company car and quite genuinely does not use it privately (he works from home) as he has another car, and the company vehicle is usually full of the product he sells and all of his paperwork (I've seen it - it really is a mess!). He pays the company a small amount each month to cover the very occasional stop in a supermarket or similar on his way home, which may have been a mistake as it ackowledges availability for private use, but he thought he was doing the right thing by the company. HMRC are trying to charge him in the region of £8000 pa as a car benefit, as he needs a large car for the usage it gets.

I accept that, reading the legislation, they have the right to charge this benefit. But it also seems totally iniquitous that someone should be taxed a huge amount of money for minimal private use, which he makes good to the company. Our tax system always used to insist that people paid a fair amount of tax but this seem symptomatic of HMRC's new approach of taking whatever they can get away with.

Has anyone had this problem, and have you any suggestions as to how to deal with this? I know we can stop the fuel benefit, which would reduce the figure but there is still a substantial car benefit.

Thanks for your help.
Philippa Keane

Replies (6)

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DougScott
By Dougscott
16th Jun 2008 10:45

Right amount of tax
Gordon Brown has always been very keen on people "paying the right amount of tax". You could write to him....

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By keanes
16th Jun 2008 08:48

Thanks for your help
Thanks to all for your help. I was hoping someone would come up with the perfect argument to avoid the charge! I've advised him already to either buy the car from the company and claim mileage, or to change it for a vehicle classed as a van, but we were looking for help with the charge HMRC are currently trying to levy.

I still think this is a totally unfair tax, and there should be a better way. The system is supposed to tax the 'benefit' and where there is clearly no benefit there should be no tax. I assume from your comments Scotty that you lost your argument so does anyone think we should fight this?

As I said in my original post, I was taught as a trainee (admittedly a very long time ago!) that our tax system was supposed to levy the right amount of tax and if a benefit is received then it is right and fair that a tax charge results. But the current system of 100% charge to tax after 1 private mile, with no mitigation for actual benefit received, seems totally contrary to this principle.

I would like to take this further but have no idea of where to go. Is the system too big to fight? In the past I would have insisted on a Commissioners hearing, but the new system now means they will only rule on interpretation of the law, and I accept that the law is on HMRC's side. It is the law which is wrong, not the inspector's interpretation of it.

Any ideas?

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By User deleted
12th Jun 2008 08:58

Options to consider
If there is factually no private car mileage at all then the car fuel element of the BIK is eliminated and should never be declared in the first place.

If the BIK for the car itself is a problem then two options should be explored :-

(1) Have a van instead of a car (probably a very practical solution as we are told that the vehicle's main role is transporting products / samples)

(2) Own the vehicle privately and claim a tax-free mileage allowance from the employer, which I expect will exceed the running costs of the car. The tax-free mileage allowance on the said-to-be 100k business miles pa. would be £26,500.

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By neileg
12th Jun 2008 13:54

Always going to be an issue
It is always going to be difficult to argue that a car that is kept at a director's home is not available for private use. The legislation only requires that it is available, not that it has ever been used, but HMRC will often accept that non-use extinguishes the benefit. There's no statutory basis for this practice.

I t may seem iniquitous, but the reverse is true now that benefit is based on CO2 emissions. You could do 100,000 private miles a year and no business miles and be assessed to the same BIK charge.

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By User deleted
12th Jun 2008 22:18

Unjust but true.
Totally sympathise - I'm nearing the end of a long argument with HMRC over clients who can prove that the vehicle is not used personally and also contravenes health and safety regulations to do so and HMRC are still insistant on BIK. Similar situation of job requiring sepcific type of car which means reasonably expensive and BIK is high. So unjust!

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DougScott
By Dougscott
12th Jun 2008 09:50

Subsistence
Are you sure he wasn't stopping at supermarkets on the way to clients and therefore no extra mileage? In fact was he getting items for "travel & subsistence" and anything he got for use at home was incidental to the trip?

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