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Camper Van rental business - Ltd Company?

Will availability for personal use attract p11d BIK treatment

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My wife and I are about to start a camper van rental business.
We are trying to weigh up pros and cons of running it as a limited company.
There are a number of considerations.

1.    P11d BIK
The Van will be rented through an agency and will be available for rent 365 days of the year. However, on occasion, if it has not been rented, we may decide at the last minute to use it ourselves.
We run various other businesses and are very busy, so this will be the exception rather than the rule.

Is HMRC likely to treat it as being available for personal from a BIK perspective even though we are not using it? I have discussed this with our accountant and he feels that it is a fair rationale to say that while it is available for rent, it is not available for personal use.
Any other perspective would be gratefully received.

2.    Transfer of ownership.
We have not yet set up the company but have bought the van in preparation. Is there any problem selling the van to the company at cost?

3.    Will we be able to claim 100% capital allowance and roll the loss forward to offset against tax in future years? Or would it be better to depreciate the asset?

Many thanks in advance for any input here
Also if anyone can think of other considerations that will help decide whether to incorporate or not that would be useful

Thanks again
Ralph

Replies (36)

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By Tax Dragon
17th Jun 2021 11:06

As I have said on other similar threads this week, if it makes enough difference to worry about, then it makes enough difference to take advice about.

But I'll give you 1. Your (accountant's) logic fails as you are telling us that you will be using it at times when it is not available for you to use. [Edit: actually what you say is possibly ambiguous, but my interpretation here is the most natural one.]

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Replying to Tax Dragon:
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By Paul Crowley
17th Jun 2021 11:14

I read it as
It will be used, but accountant says it is not available for use on each of those occasions.

Simple answer is do not use a company unless your accountant can fix the problem.
Clearly a problem that could escalate into being available for use at all times

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Replying to Paul Crowley:
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By [email protected]
17th Jun 2021 12:10

Thanks for your reply - please see my response above.

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Replying to Tax Dragon:
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By [email protected]
17th Jun 2021 12:07

Hi
Thanks for your reply.

So to re-phrase and clarify:
We may possibly use the van ourselves for up to and not exceeding 2 weeks in a year.
We would only use the van if at the very last minute it hadn't been rented.

I'm wondering if by defining a company policy which for example limits private use to only 2 weeks in the year, whether it would still be considered as available throughout the year or if it would be necessary to never use it.

Thanks again

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Replying to [email protected]:
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By Hugo Fair
17th Jun 2021 14:16

My view (and it's only a personal one since I've run out of energy to chase down the relevant regs) is:
* as soon as you "use the van if at the very last minute it hadn't been rented", you've pretty much proved to HMRC that it's always 'available to you' except for when it is rented out.

So, unless (in your example) you can be sure of achieving rentals for 50 weeks p.a., then the BiK will apply to more than just the 2 weeks when you were actually using it!

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By paul.benny
17th Jun 2021 12:03

For avoidance of doubt, EIM23155 says that a campervan is considered to be a car.

If I were HMRC, I might argue that the van is available for use all the time it is not available (ie when rented out). An effective rebuttal might be that it is not kept at or near your home/other business premises, and further that there are mileage logs that demonstrate that you do not in fact use the van. If you were to book usage through your agency, that might be a way of demonstrating that that usage is the only private use. You might even have a special very last minute rate.

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Replying to paul.benny:
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By [email protected]
17th Jun 2021 12:15

Thanks for the reply
I suppose we really want some certainty of what HMRC will say before deciding how to proceed. I understand that we have rebuttal options and could think of rationale to do so but am trying to get an indication of how HMRC are likely to respond.
Thanks again

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Replying to [email protected]:
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By paul.benny
17th Jun 2021 13:08

I can't tell you how HMRC will actually address this.

The test of a bik is that a car is *available* for use, irrespective of whether it is used or not. To rebut that, you need grounds to show that the camper van is not available for personal use in periods when it is not on hire. And what I set out above is some potential grounds, together with a way in which even your personal use might escape being treated as a benefit.

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Replying to paul.benny:
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By [email protected]
17th Jun 2021 13:37

Hi again
Thanks very much - actually the "special rate" is a really good idea.
I assume that if we only ever use it personally is when we rent it ourselves, it would be difficult for HMRC to force the position that it is still available for personal use. In the same way that if an employee never ever uses a company car it would not be deemed as being available - or am I over simplifying the position?
Thanks again

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Replying to [email protected]:
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By paul.benny
17th Jun 2021 14:39

You're not just over-simplifying, you're wrong. Availability for use has nothing to do with actual use. Even if my car sits in the company car park while I go off on holiday, it's still available for use.

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Replying to paul.benny:
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By [email protected]
17th Jun 2021 15:59

I realise that availability has nothing to do with actual use.
However, I was under the impression, perhaps wrongly it now seems, that if a company provided a company car and specifically disallowed personal use and the employee never used it personally that it would not be considered a benefit in kind.
I now find it difficult to imagine any scenario in which a company car would not be considered a benefit?

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Replying to paul.benny:
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By David Ex
17th Jun 2021 14:51

paul.benny wrote:

I can't tell you how HMRC will actually address this.

The test of a bik is that a car is *available* for use, irrespective of whether it is used or not. To rebut that, you need grounds to show that the camper van is not available for personal use in periods when it is not on hire. And what I set out above is some potential grounds, together with a way in which even your personal use might escape being treated as a benefit.

You might be right, Paul, but I always understood that the “available” test was very difficult to avoid in an owner managed company.

Does paying to use the van (at normal or reduced rates) avoid a BIK altogether or is it just a payment for private use to reduce the BIK?

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Replying to David Ex:
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By paul.benny
17th Jun 2021 15:27

David - there was a VAT case reported here about a year ago concerning recovery of input tax on cars.

The taxpayer company provided expensive cars purely for client visits and had claimed input tax. They only issued keys on a journey-by-journey basis, kept mileage logs and the drivers had personal vehicles of comparable quality. The tribunal ruled in favour of the taxpayer.

Clearly that's VAT and not PAYE. I think it shows that a case can be built here that the campervan is not available for personal use - but equally that it has to be a stronger case than merely having the van available for public hire.

To me, booking and paying via the agent helps make the case that it's never available for personal use. But probably it has to be on terms available to the general public, or, if there are other employees, available to them.

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Replying to paul.benny:
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By David Ex
17th Jun 2021 18:08

paul.benny wrote:

David - there was a VAT case reported here about a year ago concerning recovery of input tax on cars.

Interesting stuff. I don’t know the details but I think it’s still a big ask for an owner managed business. Also don’t think we know where the van will be kept in between rentals. That might add some weight to the availability question.

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Replying to David Ex:
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By Bobbo
18th Jun 2021 08:29

If i recall correctly, this https://financeandtax.decisions.tribunals.gov.uk/judgmentfiles/j11273/TC... is the case being referred to.

As noted of course the principle of this case was VAT recovery, rather than PAYE. And if i read correctly the VAT claim was made by a sole trader and the other persons that used the cars were 'contractors' not employees so PAYE doesn't come into it.

One noteworthy point, aside from all the talk of keys kept in safes, is that the appellant had a mileage log detailing the business purpose of 93% of miles covered and asserted they could schedule the remaining 7% which were merely shorter journeys, rather than some unknown difference.

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By zebaa
17th Jun 2021 12:04

Insurance may vary done via Ltd or personal (sole trader / partnership / ltd partnership) . On the latter point ( trading entity) also consider what could go wrong.

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Replying to zebaa:
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By [email protected]
17th Jun 2021 12:17

Thanks for your reply.
Yes we had considered and discussed with the current insurer who have told us that it would make no difference to the premium and that we could easily move the policy. One reason for wanting to consider a limited company was to limit our liabilities if something did go wrong - was this what you were referring to?
Thanks again

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Replying to [email protected]:
paddle steamer
By DJKL
17th Jun 2021 12:31

LLP as an option?

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Replying to DJKL:
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By [email protected]
17th Jun 2021 13:07

Hi
Thanks
I dont really know about LLP's and what the tax differences are.
Would things be treated differently from a Ltd company?
Thanks

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Replying to [email protected]:
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By Hugo Fair
17th Jun 2021 13:32

I suspect you've just been hooked by DJKL's fishing-rod.

When considering whether or not to set-up a company (or indeed an LLP or other 'trading vehicle'), there's a lot more to think about than taxation (and certainly not just annual taxes). There are potential liabilities (legal & financial), administrative duties, restrictions and/or higher costs on future changes, impact on borrowing options, and much more.

You really should have been talking to your accountant before you even purchased the camper-van ... but you really need to have that conversation urgently now.

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Replying to Hugo Fair:
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By [email protected]
17th Jun 2021 13:41

Thanks for your reply.
We weren't actually going to do it through a company and only started considering it having spoken to our accountant.
I do own another limited company and am aware of some of the considerations of which you speak.
Thanks again

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Replying to Hugo Fair:
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By [email protected]
18th Jun 2021 09:11

What do you mean by "I suspect you've just been hooked by DJKL's fishing-rod"
Thanks

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Replying to [email protected]:
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By zebaa
17th Jun 2021 16:47

Yes. Good luck with the venture.

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By accountaholic
17th Jun 2021 13:31

Wasn't there a case just recently with a garage owner occasionally using a stock vehicle for personal use and HMRC saying it was therefore available all the time to the owner and BIK for the full year, even if he only used it a few days in the year?

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Replying to accountaholic:
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By Hugo Fair
17th Jun 2021 13:36

Not sure what kind of garage ... but if one of the cars from his stock was available for the full year, then his sales figures must have been truly unimpressive!

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Replying to Hugo Fair:
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By accountaholic
17th Jun 2021 13:40

Agreed.

I also nearly said "stock car" but I think that's something else entirely which the average used car buyer would specifically want to buy.

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Replying to accountaholic:
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By Paul Crowley
17th Jun 2021 13:53

Yes I remember
REALLY expensive cars that were display items, Ford GTO springs to mind.
He was really a car collector but let the company buy the toys.
Tried to claim that cars not available once on SORN
HMRC won

The lesson is of late that HMRC tend to win on car and car (not van) benefits.
HMRC also have years that they can go back if BIK is just plain under reported.

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By SteveHa
17th Jun 2021 14:38

I wonder if, potentially, the benefit in kind could be even greater than the car benefit, if the cost to the company of providing it (e.g arms length rental cost) is greater than the car benefit.

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Northumberland flag
By MJShone
18th Jun 2021 07:48

I know your situation is nothing to do with covid but this might give you a flavour of HMRC's view on company car availability:

https://www.gov.uk/guidance/how-to-treat-certain-expenses-and-benefits-p...

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Replying to MJShone:
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By [email protected]
18th Jun 2021 09:09

Thanks
This is a good indication on their stance and lack of flexibility - it give a very good feel of what we are dealing with

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Replying to [email protected]:
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By Tax Dragon
21st Jun 2021 09:20

ralph.hunt-AT-voxtek.co.uk wrote:

it give a very good feel of what we are dealing with

You appeared in your OP to want to argue that the van was not available to you even while you were in fact using it. HMRC suggests that a car on someone's driveway is not unavailable for use merely because they've been told not to use it. I dunno, but there's a certain reflective symmetry there.

So, while I agree HMRC's view seems harsh, there is an undeniable whiff of hypocrisy about your attitude.

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Replying to Tax Dragon:
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By [email protected]
21st Jun 2021 09:43

It appears you have the ability to read something and infer something completely different - there seems to be an undeniable whiff of attitude about your attitude. I was asking for constructive assistance to help decide whether or not a limited company was the right vehicle - so please ditch the moralising or at least if you insist in adopting your judgemental approach make sure you are using a sound basis for your accusations.

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Replying to [email protected]:
RLI
By lionofludesch
21st Jun 2021 11:08

ralph.hunt-AT-voxtek.co.uk wrote:
I was asking for constructive assistance to help decide whether or not a limited company was the right vehicle ....

I see what you did there.

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RLI
By lionofludesch
18th Jun 2021 10:37

So to summarise - if the business expands to 100 camper vans, the directors pick up 100 biks a year.

Seriously - that seems very unlikely to me.

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Replying to lionofludesch:
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By Tax Dragon
18th Jun 2021 10:52

Apply law not logic. What stops that happening?

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Replying to lionofludesch:
blue sheep
By Nigel Henshaw
21st Jun 2021 06:39

lionofludesch wrote:

So to summarise - if the business expands to 100 camper vans, the directors pick up 100 biks a year.

Seriously - that seems very unlikely to me.

No because this would fall under the same rules for motor car dealers where the averaging process is used https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim23800

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