Company cars..not P11d's by previous agent

Company cars..not P11d's by previous agent

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HI,

I have taken on a lot of new clients recently who have company cars, and it seems that a lot of firms treat the car as a Director Loan ( even though it is in the Company Name ) and then charge mileage to the PL to make up the cost.

My most recent job though has Lease costs on two cars of around £ 14,000 ( t/o of business is £ 75k, so substantial), no P11d and treated a company cost. I asked the previous accountant if any P11d or P46's had been completed and never got a response.

The directors do have a high business mileage, but do use the cars personally - there is no arguement about that.

Initially, I mentioned to the client that the treatment was wrong, but if I correct it, the directors will be with a high personal tax bill, one for three years, the other for one year.

What would you do?

Replies (8)

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By The Black Knight
07th Feb 2012 10:37

and if you don't

You will be assisting covering up a money laundering offence ? If they did this deliberately of course or deliberately don't put it right...not funny and really common.

I would explain to directors and ask them whether they had any advice on this matter....who was responsible for completing P11D's and do they have any letters on this.....then ask for previous agents insurers details.

It is just a fact of life that in giving the correct advice you stand the risk of loosing the client....But presumably they came to an accountant that knew what they were doing for a reason......lower penalties perhaps?...

The hardest part of our job is giving correct advice that contradicts popular folk law or what the client wanted to hear. The arguments I have had trying to prove I have done my job right !

It takes longer to get things right (which costs more) and you then have to take twice as long explaining yourself......who would be an accountant ?

Good luck ...I really do feel for you.....everyday occurrence though.

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By Optimum PAYE
07th Feb 2012 10:45

I agree with The Black Knight, you don't really have a choice, do you ?

Think of it a different way, If HMRC were to undertake a PAYE audit on your client any time soon, it is nearly 100% certain that they would identify the mismatch i.e. car costs going through the business but nothing on P11Ds. You wouldn't be doing your client any favours at all by not declaring the previous errors upfront to HMRC.

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By Steve Kesby
07th Feb 2012 12:06

There are two separate issues

For those where the company has presumably purchased the car and "treated it as a loan", there's actually no reason why a company shouldn't buy the car and sell it on to the director in exchange for a loan, provided there's a genuine transfer of ownership.  I'm not sure what you mean by "even though it's in the company name" though.  Even if it is a company asset, the registered keeper should be that of the real person (ie not an artificial one like a company) that keeps it.  Custody and ownership are different things.

I agree with you and the others on the leased cars (assuming the company is the lessor) that your clients have cars available to them, by reason of their employment, without any transfer of ownership.  As such they are company cars and tax/NI is due accordingly. If your clients won't get the matter put right, you can only follow the necessary procedures.  If your clients have difficulty accepting that they are company cars, you can refer them to the case of Stanford Management.

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By murphy1
07th Feb 2012 11:30

Thanks everyone.

I'm lookong forward to my 2pm today now....not!

Armed with the above case law, I'm sure the client can only see that I have provided the correct information.

 

 

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By flurrymc
08th Feb 2012 13:17

 Baldorino

 

I hate to throw a spanner in the works, but in  Victor  Baldorino  Charles Hellier disagreed.  Personally I prefer the Stanford finding, but Baldorino is equally valid, and it will not be appealed as HMRC won as there was no agency agreement in place.

 

 

15.    In Stanford the tribunal said at [47] said that even if there had been an agreement such that the company acted as agent of the employee in leasing the car, "the legislation is not concerned with agency or any other law. It stipulated the correct tax treatment to be used when an employer provides a car for its employees. The contract was in the name of the company, the legislation was satisfied and so benefit arose."

16.    We disagree. The legislative question is whether a car is made available to a person "by reason of his employment". If the car was made available because the company acted as the employee's agent in forming a contract between the employee and the lessor, it may well be the case that the car cannot be said to have been made available by reason of the employment. Whether or not that is the case will depend on the facts. The nature and circumstances of the agency relationship will affect the answer to the statutory question, but the mere fact that the company has acted as the employee’s agent in forming the contract will not determine the answer. Further if the employer has acted as the employee’s agent in leasing the car, then the car is not made available by the employer but by the lessor and the deeming of section 117 does not automatically cause the car to be treated as having been made available by reason of the employee’s employment.

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By Steve Kesby
08th Feb 2012 13:23

Baldorino

Isn't the point on which Charles Hellier disagrees a purely hypothetical one with respect to the agency point?

In Stanford didn't the company just enter into the leases as principal and then charge the payments to DCA in hindsight, following advice from their accountants?  I'd taken that to correspond with th OP's circumstances, but I suppose there is a margin for the company contracting as agent.

In Baldorino it seems that the argument is that a benfit still arose because the director was a party to the lease by reason of his employment?

Interesting further case on the subject though.  I'm glad you brought it up.

With respect to the links, if you highlight the words you want to use as a link and then click on the little icon of a globe with a chain link in front of it, it brings up a dialogue box that you can paste your link into.

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By murphy1
08th Feb 2012 13:13

Thanks again.

 

So, would you still ensure that you P11 d the cost or would you put it to Director Loan?

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By flurrymc
08th Feb 2012 14:33

P11D

I would be very suprised if your client and his company had a formal agency agreement drawn up, so Baldorino is of purely academic interest.  The benifit should go on the P11D, with credit for what he has paid for the use of the car.

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