Who gets the car benefit

Who gets the car benefit

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Company owned 100% by wife. Husband works elsewhere (full time) but is a director of wife's company. If husband is provided with a car through wife's company would he be taxed on the benefit since he is a director of the company (but receives no remuneration because he doesn't work for the company) or would it be taxed on the wife? Wife does not at present have a company car.

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By johngroganjga
04th May 2014 17:10

If it's provided by reason of him being a director of the company, it's taxed on him. If it's provided by reason of him being the spouse of the 100% shareholder it's taxed on her.

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By tebthereb
05th May 2014 00:34

Confused

Its late but I am not following why a non-working director would be assessed on the BIK, how does that interact with s117 ITEPA?

Is the wife merely a shareholder?

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By Steve Kesby
05th May 2014 08:38

Whether or not...

... the wife is a de facto director, she's highly likely to be a shadow director and thus satisfy the definition of director in ITEPA 2003, s. 67 for the purposes of the application of s. 66 and the benefits code generally, meaning that the benefit is most likely taxable on the wife.

S. 117 only applies where the employer is an individual. The employer in this situation is the company.

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By tebthereb
05th May 2014 09:22

I thought that...

...the exception contained within s117 only applied where the employer is an individual (and benefit provided in normal course of domestic relations). As that exception does not apply I thought that per s117 the position was that:

"A car or van made available by an employer to an employee or a member of the employee’s family or household is to be regarded as made available by reason of the employment".

If the wife is a director for the purposes of the BIK code, then as you suggest I think the benefit must be on the wife - so I don't understand why John was saying if provided by reason of directorship it would be taxed on husband? How can that be the case when he is a just an office holder and not an employee or director?

What if wife is not a director for purposes of the BIK code?

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By Steve Kesby
05th May 2014 09:47

An office holder...

... is an employee by virtue of ITEPA 2003, s. 5.

By default the car benefit is taxable on both of them, under s. 117 (apologies I thought you were referring to the exclusion). They're both employees (including office holders) or directors, and for both of them the car is being made available either to them or a member of their family.

S. 148 then deals with the apportionment between them. It seems more likely than not that the true position is that the car is being made available to the wife for the husband's personal use (s. 148(4) refers), meaning that it is the husband's car benefit that is justly and reasonably reduced to nil, with no reduction for the wife.

I suppose that equally though it could be argued that since the husband is the one that actually uses the car it is the wife's benefit that should be reduced to nil, with the husband having a full car benefit.

I suppose the question is which one pays tax at the highest rate? :)

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By Jane S-D
05th May 2014 10:03

Sorry if I wasn't clear originally, both spouses are directors but only the wife is a shareholder. It's her company - she works full time in it. Husband works full time elsewhere but does assist in the company occasionally.

Husband would be using the car for the vast majority of the time - wife would only use it rarely.

Still need to do the maths as to whether it's worthwhile anyway.

But thanks to you all for your thoughts.

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