Van BIK query

Van BIK query

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An employer makes available to an employee a CO2-emitting van, which is used during the year on the following journeys:

Commuting from home to a permanent place of business: 1000 miles

Qualifying business use by that employee while at work: 900 miles

Qualifying business use by other employees while at work: 200 miles

Other use: 0 miles

Does this satisfy the conditions of s.155(7) IT(EP)A 2003, please?

One interpretation might be that business use = 900/1900 miles, which is <50% business use and therefore not "mainly" for business use.

Another interpretation might be that home-to-work commuting should be disregarded as "non-business use" consistent with s.155(5)(a), and/or the 200 miles other business use should be taken into account.  Either of which would tip it over the 50%.

My gut feel is that the conditions are not satisfied for the exemption afforded by s.155(2)(a), and s.155(4)(b), not least because s.155(7) expressly refers to s.171(1) for its interpretation.  Accordingly, in this case a BIK is chargeable.  Do all y'all agree?

With kind regards

Clint Westwood

Replies (4)

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By Ernest N Dever
13th Jun 2011 13:20

No

My interpretation of the word "mainly" is that it qualifies the preceding words "is available to the employee", which would look at the intention of the employer in making the vehicle available.

You are interpreting that word as qualifying "use for the purposes of the employee's business travel".  I personally disagree with that construction and consider that "available to the employee" (as qualified by "mainly") qualifies the phrase "for use for the purposes of the employee's business travel".

So in your situation I would argue that there may be no benefit as the other condition in S.155(5) is qualified (provided the terms on which it was made available prohibited its use other than for business and personal commuting).

Just my view though.  I've never considered the situation where the commute significantly outweighs the business use.

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By valentino rossi
13th Jun 2011 13:27

Reason for provision

Has the van been provided because the employee needs it to perform his duties.

If so then I would be inclined to allow the exemption to apply and no benefit to be incurred.

If however it is really just for commuting and they send him out once a month to pick up a part to try and get the exemption then I would agree a benefit has arisen.

I wouldn't let the numbers affect your decision and would instead look at the quality of the business journeys and indeed I would fight any arguement by the Revenue that a benefit had arisen.

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By nogammonsinanundoubledgame
13th Jun 2011 13:52

Thank you, both, for useful input

@ Ernest N Dever

If I might take you up on one point, I do not think that s.155(5) is relevant, here.  S.155(4) requires that both of 2 tests are satisfied, (A) the no private use test and (B) The positive business use test.  Section 155(5) is only relevant in determining whether the no private use test is satisfied, which I think is not in doubt.  The exposure in this case is the positive business use test, for which s.155(5) is not relevant, but s.155(7) is.

I take your point that intention may be more relevant than actual use.  In that case, if the employer's expectation at the time of providing the van was that business use would outstrip commuting, then the fact that it marginally fails to meet that expectation may be irrelevant.  Nevertheless, the employer will have been aware that commuting will have been one of the uses to which the van would be put, and if the normal English definition of "mainly" is applied, then I am concerned that if the actual use bears out the expectation from the outset, this could scupper a claim for exemption, particularly as the commuting costs would quite clearly fail the "business travel" test in s.171 to which s.155(7) expressly refers.

With kind regards

Clint Westwood

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By Ernest N Dever
13th Jun 2011 14:03

Apologies

My reference to S.155(5) should have been to S.155(4).  My eyes slipped!

The point I'm making is essentially the same as Valentino's.  If the employer is making the van available primarily for the business use, but the availability for personal commuting follows from that, then in my opinion the van "is available...mainly for use for the employee's business travel.  My focus is on the first "for", whereas yours is on the second.

As Valentino says though, if the van is being primarily made available so that the employee can get to work, then the "available... mainly for" test then fails and a benefit arises.

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