DJ Cooper v HMRC: Car trouble for company directors
A recent tribunal confirming HMRC’s increasingly hard line on directors who benefit from company assets could put a brake on company cars provided by partnerships, warns Lesley Stalker.
The tendency for celebrities and highly paid executives to become self-employed “consultants” to avoid high taxes is becoming less fashionable for a number of reasons including IR35 controlling persons rules and controversies around the practice within public bodies including the BBC.
But it is still theoretically possible to work for a limited company and be provided with a car by a partnership of which you are a partner to take advantage of less onerous tax treatments for private use of benefits in kind.
But a recent tax tribunal case highlighted the growing risks of this strategy. The appellants in DJ Cooper and partners v HMRC  UKFTT 439 (TC) were faced with a retrospective tax bill of £200,000 after HMRC penalised them for what it regarded as a deliberate attempt to avoid paying taxes on company vehicles, which they believed were predominantly a private perk.
The case really hinged on the commerciality of the situation: HMRC argued that the cars were only provided by the partnership by reason of employment with the limited company and the tribunal judges agreed.
Since HMRC is on the lookout to boost its tax take, it is seeking to pushing back the boundaries between tax planning and tax avoidance. Any tax planning strategies you undertake should be very well thought through and need to be predominantly commercially driven to avoid situations such as this.
This article is based on a blog by Lesley Stalker of the Robert James Partnership. If you have concerns or questions relating to potentially taxable benefits you might be receiving, either as a partner or company director, She is available via email at las[AT]rjp.co.uk