Car benefits on leased cars

Car benefits on leased cars

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A client company leases cars for employees. The employees pay the company 100% of the lease costs. HMRC says that there should be a car benefit charge but will give a credit for the lease costs paid. We have tried to argue that the lease beneficially belongs to the employee.

S114 ITEPA 2003 refers to a car being made available without any transfer of the property in it. If "the property in it" is limited to ownership (and case law seems to support this), the property remains with the lease company and therefore there can be no transfer of the property in it. By assigning the benefits of the lease, the company has made the car available and so there is a car benefit charge.

Following this logic, if an employee of a leasing company leases a car from his employer on full market terms, there is a car benefit charge. In practice, if this situation does arise, and there must be cases, I think it highly unlikely that HMRC would pursue the charge.

The trouble is that arguing that others should be caught does not help our client.

Is this yet another case of the unfairness of tax that makes a mockery of the phrase "the right amount of tax"?

Yes, I know that the leases need to be in the employees' names in the future but it is the past that is my immediate concern.

Graham Buckell

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By AnonymousUser
18th May 2007 17:01

Little comfort
The law is the law and it is unfortunate that we have the scale charge, less any amount made good. If the hire is less than the lease cost there is a benefit. If you think it through, if the car benefit, according to the scale charge, produces a higher benefit than the lease than the company is paying all employees are being charged to a benefit more than the cost of the employer providing the benefit.

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By Richard Willis
21st May 2007 09:11

Tax experts please confirm...
As an aside; am I correct in thinking that BIK's are the only area where one can be taxed on something that hasn't actually been received? e.g. Scale charge for fuel, even if fuel is < scale charge.

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