Apollo Fuels wins company car case

Photodisc/Thinkstock

A legal victory for a company car scheme is a rare bit of good news for motorists.

The case of HMRC v Apollo Fuels Limited and others [2014] UKUT 0095 (TCC) was decided at an upper tribunal in February and was one of the cases discussed by Giles Mooney and Tim Good in the April edition of TAXtv.

The upper tribunal upheld a previous ruling by the first-tier tribunal, although any wider celebrations will be short lived as the latest Finance Bill has closed down the use of this scheme.

TAXtv presenter Tim Good said the ruling was important because around 20 other companies have been involved in a similar arrangement to Apollo's.

The dispute with HMRC was about a change to the company’s car scheme for employees...

Continued...

» Register now

The full article is available to registered AccountingWEB members only. To read the rest of this article you’ll need to login or register.

Registration is FREE and allows you to view all content, ask questions, comment and much more.

Comments
Steve Kesby's picture

A bit more info    4 thanks

Steve Kesby | | Permalink

There were three points in Apollo Fuels' case:

  • that the employees had proprietary rights in the vehicles such that there had been a transfer of property in the cars, meaning that a car benefit didn't arise. Apollo Fuels lost that argument at the UTT,
  • that ITEPA 2003, s. 114(3) applied to prevent there being a car benefit as the employees were receiving money's worth chargeable under s. 62, albeit that the amount of that money's worth was nil. They won that argument, but s. 114(3) is now being removed by this year's Finance Bill.
  • that a car benefit couldn't arise because there was no benefit, since the employees paid a market rental under the leases. Apollo Fuels won on this point.

HMRC have been granted leave to appeal to the Court of Appeal. They will want to displace the decision in the third bullet, and I think they've got a good chance, given the definition of a benefit for the purposes of the residual benefits charge.

The decision for the middle bullet is moot going forward, so one hopes that Apollo Fuels will have cross-appealed on the decision in the first bullet.

A tiny loophole closed

David Heaton | | Permalink

The s114(3) point in the Finance Bill is possibly a huge overreaction from HMRC to losing Apollo.  The very odd thing about the leasing arrangement was that the employees were entitled to lease the car on to a third party without permission from Apollo, which is what made the leased car an emolument, because it turned the benefit in kind into money's worth (an emolument in 'Old Testament' terms).  Apollo actually owned the cars, it didn't lease them, or it probably would not have been able to lease the cars on to the employees on those terms.  I have never seen or heard of this type of arrangement before, so HMRC's reaction can only be a result of its worrying that lots of SMEs would copy the Apollo arrangement once its success at the tribunal became public knowledge.

As Steve rightly says, the third point is important, because it has a much wider impact on the benefits code generally. If tax is to be seen to be fair, the Upper Tribunal ought to be right in saying that you can't be taxed for buying something from your employer at the open market price, but the beneficial loan rules had to be changed many years ago so that open market rate loans made by banks and building societies at less than the official rate would not be taxable.  Has that rule been wrong for all this time?

Can someone explain this in layman's terms?

zoemarciniak | | Permalink

I am a bit confused by this ruling - can someone explain this in layman's terms?  If the employees paid the company for the lease - what is the issue??

HMRC gives with one hand ...

AndrewV12 | | Permalink

Quite interesting to see how quick HMRC closed this loophole possibly  even before they lost the case.