Recharge for private use of a company car

Recharge for private use of a company car

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Good afternoon!

I'd appreciate some comments on the following:-

A member of staff has been issued with a company car until a commercial vehicle becomes available, he was told that it should not be used for private use however he has declared some private mileage to us. He has made three private journeys with total mileage of about 60, the car has done more than 1200 miles for business trips so the private miles are incidental (?)

I realise the company car is "available for use" but would it acceptable to recharge him at 45p per mile to avoid the car benefit?  

Many thanks

Replies (15)

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By Duhamel
21st Nov 2014 20:11

In short no..
Reimbursement makes no real difference. A contribution to the running costs can reduce the benefit but, from memory, not remove it.

The point is that the car was available for private use. Actual use is irrelevant.

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By Marion Hayes
21st Nov 2014 21:54

?Available

I am not sure I agree with that.

The poster says the employee was specifically told the car was not for private use.

Can you demonstrate all the conditions were in place to prevent it being used?

Are you taking disciplinary action due to the failure of keeping to the rules?

If it was unavailable, and reimbursement also occurs there is not necessarily a benefit.

What were the circumstances

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Replying to GW:
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By hatemb
23rd Nov 2014 01:21

Hi,

The employee is mobile, works from home, he is also new. Although told he had no private use the vehicle is kept at his home until a commercial vehicle becomes available.

He has done 3 journeys, 8 miles, 6 miles and 45 miles, I was hoping to recharge him and maybe issue a disciplinary letter but also inform him of the financial repercussions of private use.

As the car has to be based at his home it would be hard to argue that it is not available for private use but as he has only done 3 journeys I hoped these could be seen as "incidental"with a 45p per mile recharge and no car benefit.

Safest course of action to include it as a car benefit ensuring no private fuel is paid for by the company?

I believe a permanent, commercial vehicle will be available in the next month, he's looking at a 6 month car benefit (I don't have exact dates to hand).

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Replying to GW:
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By neileg
25th Nov 2014 17:07

Mmm...

Marion Hayes wrote:

I am not sure I agree with that.

The poster says the employee was specifically told the car was not for private use.

Can you demonstrate all the conditions were in place to prevent it being used?

Are you taking disciplinary action due to the failure of keeping to the rules?

If it was unavailable, and reimbursement also occurs there is not necessarily a benefit.

What were the circumstances

Whatever restrictions were in place were not effective in preventing private use so the argument doesn't hold water. Usually the only way HMRC will accept no private use is if the car is locked up on the employer's presmises over night. I'm inclined to agree with HMRC.
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By Duhamel
25th Nov 2014 13:52

I believe..

... that HMRC would argue that the car was made available to him and thus a car benefit arises so that safest course of action would be to include it on a P11D. There may be scope to argue otherwise, but I believe it would be hard to convince HMRC of it - therefore the safest option is just to accept the benefit.

 

Thanks (1)
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By Stuart.thomson
25th Nov 2014 21:05

I agree with faultybasil2575.

However I think there is a small risk of HMRC arguing that even a repayment at cost could be a benefit based on either (1) getting the benefit ahead of paying for it; or (2) that it does not reflect to all costs. Therefore I would suggest that the employee is charged at a rate as if it was a car rented to a third party and not just at cost (the true cost of which will be of be debatable).

Using the shop keeper example above, if he steals £20 then makes sure there is no challenge that there should be interest and costs added and so a benefit by demanding more than £20 back.

So long as you can justify the recharge as a commercial rate, I think your client is fine. So it does not need to be Avis pricing which the employee might feel unfair (sorry Avis).

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By hatemb
25th Nov 2014 22:49

Thanks for the comments, it's been really useful.

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By neileg
26th Nov 2014 22:33

I don't agree with Basil or Stuart

HMRC have a sausage machine. You feed the facts in at one end and the answer pops out the other end, in this case a taxable benefit reduced by employee contributions.

Logic and equity have nothing to do with their view. I can count on the fingers of no hands how often I have seen HMRC divert from a literal interpretation of the benefit rules.

Good luck if you want to have a go.

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By Rammstein1
27th Nov 2014 07:35

Insurance

Did the insurance state business use only.  That way, it would be unavailable for private use and it might swing your arguement.  If it was for private use as well and he used it privately, I wouldn't fancy your chances.

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Portia profile image
By Portia Nina Levin
27th Nov 2014 10:10

I agree with Basil

And let me tell you, I hate myself for it! :)

Apart from the slippage of actually having private use, the facts probably otherwise fit within Gilbert v Hemsley.

I believe that if the employee travels home to sites, insurance companies regard that as commuting, and I further believe that you cannot have cover for commuting, without it being insured for social, domestic and pleasure use. So I do not think the insurance would be conclusive, but do check.

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paddle steamer
By DJKL
27th Nov 2014 10:23

Mitigation, would this work

Given the error and the BIK now running, is there sense/ does it work if the employer now removes the car from the employee  (to stop the clock re the BIK) and then issues him with a different car from now until his van arrives (which has no private use), thus reducing the time period over which the BIK for private use applies.

Bear with me re this, car benefits are not something I deal with much these days, but would this work?

 

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By User deleted
27th Nov 2014 10:25

I disagree with Basil's analysis

Apart from the very last bit - the facts will determine the outcome.

There is no reference in the tax legislation to a car being "made available for private use". It may appear to be a question of semantics, but the test is broken into components, two of which are that the car is made available (I don't think that can be questioned in this case) and that the car is available for private use. That second leg is clearly dealt with at s118. The conditions in that section will either be met or they will not. Whether in breach of his employment contract or not, if the employee has, as a matter of fact, used the car for private purposes he will have failed 118(1)(b).

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Portia profile image
By Portia Nina Levin
27th Nov 2014 10:29

Oh [***]!

I agree with BKD now. But I do not feel any better! :)

DJKL's suggestion would reset the section 118(1)(b) clock.

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By User deleted
27th Nov 2014 12:55

No need to apologise, Basil

Nor any need to sound so surprised :)

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James Reeves
By James Reeves
29th Nov 2014 09:46

Excellent work.

This thread demonstrates all that is great about this forum. Knowledge expounded, reviewed, discussed and revised accordingly.

(Except that last spam moron of course)

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