Car Benefit and reimbusing employer the costs to reduce benefit in kind
In the situation of director shareholders and company cars, is it normally beneficial for the director to reimburse the company for the full cost of the car to eliminate the benefit in kind and Class 1A?
In the scenario where the company is contract hiring the car and claiming 50% VAT back and it is a requirement of the provision of the car to the director that the director reimburses the company the costs in full.
Do the contract hire costs inclusive of all VAT need to reimbursed?
AND all running expenses (except fuel) need to be reimbusred also, again gross of VAT?
The directors cover the reimbursed cost out of an additional dividend voted.
OR do the full amount of the benefit in kind need to be reimbursed, and if so how is VAT dealt with?
There will be a difference between the running costs and the benefit in kind, which will depend on the particular deal.
The question has arisen from a garage telling a client that reimbursing the company in full is the norm these days, and I'm checking whether or not this is the case.
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