Company car benefit in kind

Company car benefit in kind

Didn't find your answer?

I am pretty sure the answer is no but the question was raised to me so thought i would clarify it.

One of our employees is given a company car in which there is a benefit in kind on.

I understand the benefit in kind covers the cost of the car, repairs, insurance, servicing, road tax etc (but not fuel obviously)

The employee pays his own insurance on the company car and we do not insure the car in any way.

Due to this the employee has asked if he can claim the insurance payments as payments towards the running cost of the vehicle on his P11d.

As i said i am thinking no but any clarification on this would really help, cant find any guidance either way on this.

Thanks.

Replies (7)

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By creevagh
17th Oct 2013 15:36

No / Maybe

As I see it, there are two possibilities for claiming the insurance as a deduction against the car benefit:

As a “Capital contribution by the employee” (section 132 ITEPA 2003).

As a “Deduction for payments for private use” (section 144 ITEPA 2003).

I do not believe that it could be argued that the payment is a capital contribution, so that can be ruled out.

Similarly, the payment made under the arrangements described is not a payment for private use; it is clearly a payment made to insure the vehicle.

So the answer to your question is that no deduction can be claimed (by you as the employer) on the P11D.

Having said all of that, with a bit of legal jiggery pokery you can restructure things so that the payment of insurance (or any other expense) can be claimed as a deduction in the future: the company will need to pay the insurance direct, and the company will need to document the fact that the employee is required to make a corresponding payment to the company in order to use the car privately.

This comes with HMRC’s blessing, via EIM25255:

http://www.hmrc.gov.uk/manuals/eimanual/EIM25255.htm

Hope this helps.

Thanks (1)
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By neileg
17th Oct 2013 16:53

Worried

To have valid insurance over an asset you must have an insurable interest. So I don't see how the employee can have valid cover on the car that belongs to or is leased by the company.

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Replying to thevaliant:
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By crispy_king
20th Oct 2013 19:29

Choices for it....

I didnt think insuring himself would be an issue, when quoting for insurance he was asked who the legal owner is (the insurance company) and who the registered keeper is (the Limited Company). He is simply the sole driver... They have sold him insurance on this basis and at quite a high quote too so if he does have an accident and they refuse to pay then i would love to know on what grounds? and if so what his monthly payments are actually insuring him for?

Thanks for the above legal perception, sounds a bit too questionable for the amounts involved but if more employees get company cars then certainly something i will look into.

Thanks.

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Replying to Paul D Utherone:
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By neileg
21st Oct 2013 09:24

Are you sure

crispy_king wrote:
who the legal owner is (the insurance company)

Insurance company owning cars?

Bearing in mind that driving a car without valid insurance is a criminal offence, I don't think I'd dismiss this casually.

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Replying to SteveHa:
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By crispy_king
24th Oct 2013 23:52

Tiredness

neileg wrote:

crispy_king wrote:
who the legal owner is (the insurance company)

Insurance company owning cars?

Bearing in mind that driving a car without valid insurance is a criminal offence, I don't think I'd dismiss this casually.

Sorry that's me not double reading, the choice doesn't say insurance company owns it, it says 'leasing company'

This is a pure operating lease and the car goes back in 3 years with no option to buy.

Any insurance website has this option, never even occurred it maybe incorrect.

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By Abacus Finch
17th Oct 2013 20:01

worried too

or he's driving a company car third party which is also a bit worrying if he trashes it. Hope he has business use on the insurance!

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By Democratus
21st Oct 2013 10:44

There has to be an insurable interest

Any Insurance company worth its salt will happily take money, it's only when a claim is made that they would point out the error made by "the customer".

If your company owns the car then it's imperitive that they ensure the car is insured. Should your employee be at fault and the compensation runs into £000s (possible) then the company is exposed to the liability with no insurance to back it up.

Even if, in the event that the car is damaged at someone elses' fault  and a claim were to be sucessful any payment would go to the employee and not the company.

I suggest that you tidy up this mess asap.

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