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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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.
?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
Mmm...
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.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
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.
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).
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.
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.
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.
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?
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).
Oh [***]!
I agree with BKD now. But I do not feel any better! :)
DJKL's suggestion would reset the section 118(1)(b) clock.
Excellent work.
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