My son, who is employed as a sales person, is provided with a company car by his employer.
His work is based at home and he makes contributions to his employer, by deduction from his salary, for the private use of the company car.
I am trying to ascertain if he should be taxed on the company car as a benefit in kind.
What are the relevant factors? How can the arrangement be best structured so he does not get taxed on the car as a benefiy in kind?
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Well, he could buy his own car, obviously, and charge his company 45p/25p a mile for its use.
As it stands, he'll get taxed on the scale benefit, less any contributions he makes from his pay.
Thank you, Lionofludesc.
OK, I understand the principles.
However, he logs all his business mileage and has his own car which he uses for almost all of his private mileage.
There is virtually no private mileage in his company car, and the small number of private miles that he does in the company car, he pays his employer for.
Doesn't this arrangement mean that he gets no private use for which he is not paying? Is it right that he should be taxed on a BIK?
No. Yes.
I disagree. I think it is far from right.
But I don't make the rules. Whether right or otherwise, it is the rule.
That was the problem, though, wasn't it ?
Folk were getting paid in kind and not paying any tax on the value.
So let the rules tax the value. Car BIK is the same if you use the car privately for 1 mile or 1m miles. Maybe it's just me, but 1m miles feels like a bigger (or more valuable) benefit.
Yes, it is.
Unfortunately, even if there was zero private of the car, this doesn't avoid a BIK.
If a car is 'available' for private use, then it is BIKable.
"If a car is 'available' for private use, then it is BIKable."
Absolutely correct. Unless, very exceptionally, private use is forbidden and does not ever take place - see EIM23400 (link below):
https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim23400
I acknowledge that the payment for p/u is probably in order to prevent a car fuel benefit from arising but, by the same token, if the driver currently pays for (even minimal) private use, it's hard to see how it could be argued that there is NO private use - even if the employer were to agree, which is probably unlikely.
As other posters have pointed out, the only realistic alternative to company car BIK is run your own. Hey Presto, BIK avoided. You then just have to buy your car, pay the loan/HP interest, tax and insure it, service/maintain it, accept the depreciation, etc, etc. BARGAIN!! IMHO, too many people get hung up about the tax they pay on a company car without working out whether they'd truly be better off without one.
Obviously, the decision becomes more finely balanced if there is a car cash alternative on offer but that is a separate discussion.
As he has his own car just get him not to use the company car for any personal use. Then get his employer to change the insurance on the car to be business use only, therefore there is no entitlement to use the car for personal use.
As he is therefore no longer entitled to use the car for personal use = no BIK.
If HMRC look into this he will have to justify that there is no personal use but that can easily be done as he has his own car. HMRC would then have to catch him using the car for personal use, but if he really isn't then there is no problem. He would have to be really careful to adhere to using the correct car for his journeys.
It doesn’t help that the car is kept at his home. That alone would make it difficult to convince anybody.
Apart from the burden of proof being on the appellant, of course.
Just to highlight, the changing of the insurance policy is the main element in my answer above for this to work.
The snag is that insurers are often reluctant to do this.
The lack of insurance cover does not prevent a car being used (privately), it prevents it being used legally which is a different question.
Fairly sure that there has been a recent case in which HMRC's argument of 'business only' insurance being required was knocked back. It's coming at it from the opposite way however well worth a read if this argument is to be made.
More important than the insurance (business-only insurance does not in itself prevent actual private use) is an express provision in the contract or other document governing car availability prohibiting private use. Even then, I have direct experience of HMRC resistance. I had a client with very similar circumstances to the leading case on this where no BIK was agreed (can’t recall the name) but Inspector refused.
There is a benefit in kind where car is available for private use regardless of whether it is used
AndrewGM & Manchester_man are absolutely right on this.
It is the “made available” issue that raises the BIK, not the actual use.
There is a recent FTT case won by HMRC of a BIK being levied on a person who was unable to drive. That person was given the services of a chauffeur In order to drive the car (rather than the taxpayer) and lost the case because the vehicle was made available for personal use .
If the car is "Available" for private use then it is taxed regardless of whther or not there is any private use.
Yes he will, if he uses it for even 1 single non business mile in the year. Simple as that.
Only way to skip it is to have a waterproof company policy setting out all the criteria for a business only car and he never ever ever ever uses it personally, not even once.
Can the company and him do that?
Otherwise... he pays tax
I would suggest that he does not need to use it so much as that to get the benefit in kind.
The insurance issue is a red herring as if he's fully comp on his own car he would usually have 3rd party insurance when driving another car, so it would 100% remain available to him
It all comes down to being available - as others above state.
You can attempt to prove the car is business only by reading/following EIM23400 but it is very difficult.
I have recently advised a client to add a tracker to the Co car, which will show all mileage and then the employee MUST be able to demonstrate it was all business. If they don't then the employee has a car BIK, added a few warnings about HMRC might fancy an argument over it all.
Co cost of BIK was 13.8% for Class 1A so they weren't that fussed as paying for ca anyway, the employee though definitely did not want the BIK as they have their own car.
I would suggest you just have the company car BIK and accept it, still probably better off once all running costs, etc taking into account.
If all the mileage is business, it's still available for private use.
Yes - exactly - what's complicated about it ?
[quote=lionofludesch]
Mister E wrote:
I have recently advised a client to add a tracker to the Co car, which will show all mileage and then the employee MUST be able to demonstrate it was all business. If they don't then the employee has a car BIK, added a few warnings about HMRC might fancy an argument over it all.
If all the mileage is business, it's still available for private use.
I would not disagree but the HMRC manuals, and other guidance I have read, suggest you can (in theory) do this.
Personally I feel it is a bit too risky, and hard to prove, so you are likely to end up with a car BIK when you have not actually used the car, or used it very little.
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