Company Cars for Shareholders & Damage to them

Does the damage repair that is paid for from the companies profits count as remmuneration?

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I work at a company where two shareholders have 50/50. 

One director was on his phone and went into another car at night and caused £3200 damage to a vehicle that he chose to repair to pay from the company profit rather than his insurance / company insurance due to the explanation that costs would go up due to this occuring. The other director does not have any claims or repairs or caused a loss to the company from an accident that required repairs. 

Can a shareholder simply bleed the company's profits dry from continuous repairs? 

Does a repair cost towards the car of a person counht as remuneration since it is paid for by the company's profits? 

The company car is purchased as a benefit in kind for the director out of the company's profits and the company pays for private insurance held in the director's name who also has the benefit of the no claims bonus as it amasses. It is entirely for personal journeys and the vehicle is 0% for work. 

 

Replies (16)

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By Paul Crowley
05th Mar 2024 19:00

Who owns the car? Who should be insuring the car? Who is misleading the insurance company? If all facts are known, is the director able to legally insure the car without admitting the crash to the insurance company ?
Insurance requires disclosure of all facts, pertinent to the risk. As such there are more matters to consider here.

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By Bobbo
05th Mar 2024 19:26

ultimatefighter wrote:

due to the explanation that costs would go up due to this occuring.

Not relevant, but presumably said director is aware they are almost certainly obliged to declare this to their insurer irrespective of whether a claim on the policy is to be made.

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By paul.benny
05th Mar 2024 19:33

Company has defrayed a personal liability of director. That's taxable remuneration and should be grossed up through payroll.

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Replying to paul.benny:
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By Mr_awol
06th Mar 2024 10:57

paul.benny wrote:

Company has defrayed a personal liability of director. That's taxable remuneration and should be grossed up through payroll.

I disagree, with the following reasoning:
1) I'm not convinced it's a personal liability.
2) Even if it was, if it relates to a company car that has been taxed elsewhere then no further tax charge is permitted.

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Replying to Mr_awol:
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By paul.benny
08th Mar 2024 19:28

I see your point. But I don't agree.

A driver is liable to third parties in the event of a collision; insurance is to offset that liability. By refusing to claim, driver is retaining liability himself.

It may be that if collision took place while driver undertaking employment duties, employer is also liable but I don't think the whole liability shifts to employer.

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By Leywood
05th Mar 2024 19:40

Oh dear

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By FactChecker
05th Mar 2024 21:43

1. "Can a shareholder simply bleed the company's profits dry from continuous repairs?"
For a start it is a director that is doing that (nothing to do with being a shareholder).

2. "Does a repair cost towards the car of a person count as remuneration since it is paid for by the company's profits?"
Depends on a lot of assumptions/unknowns ... but as described, probably (but again nothing to do with coming out of company's profits and everything to do with who incurred the liability to pay - which sounds like the Director).

3. Everything else seems to have been written from an emotional rather than factual angle ... so in terms of the actual questions asked none of the following is relevant ("director also has the benefit of the no claims bonus as it amasses", "It is entirely for personal journeys and the vehicle is 0% for work").

What is your role in this - are you the other Director?
My only 'advice' is the Directors need to talk to each other & thrash out a way forward - otherwise this may become just the first of many 'differences' that lead to a breakdown.

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Replying to FactChecker:
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By DKB-Sheffield
05th Mar 2024 22:47

FactChecker wrote:

What is your role in this - are you the other Director?

This was, indeed, my first thought. I then decided not to post (for a change) to avoid the resulting plunge into discussing legal matters (which I see has also been referred to Lion's response - below)!

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Replying to DKB-Sheffield:
RLI
By lionofludesch
05th Mar 2024 23:03

It's amazing how many folk think they should ask accountants questions they should be asking lawyers.

Possibly because lawyers don't answer legal questions.

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RLI
By lionofludesch
05th Mar 2024 22:12

Legal question alert!

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DougScott
By Dougscott
05th Mar 2024 22:13

You clearly haven't a clue what you are talking about. If the car is a company car then the company would normally be paying all of the costs of the car including insurance and any repair costs. Whether or not the company decides to claim on insurance for accident damage is a matter for the companies owner-directors to agree on. The director(s) who use a company car pay a fixed BIK on that car no matter how much is spent on repairing/servicing/insuring/taxing the car.

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Replying to Dougscott:
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By Mr_awol
06th Mar 2024 11:00

Exactly. The only way i can see any personal liability might be if instead of paying for repairs the driver offered to compensate the innocent party by way of financial settlement but didn't have the authority to do so on the company's behalf, and as such the company were bailing them out of their own obligation (but this is at best very contrived to try and find any scope for personal liability/tax effect and almost certainly did not happen).

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Replying to Mr_awol:
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By FactChecker
06th Mar 2024 12:42

That's the problem with all this guesswork ... interpretation based on poorly worded post has only a marginal likelihood of ending up relevant.

".. he chose to repair to pay from the company profit rather than his insurance / company insurance .." could mean almost anything, starting with is it personal or company insurance?

The only things with which it looks like we all agree are:
* the tax treatment will depend on establishing who incurred the liability;
* everything else appears to be a hybrid of legal/moral issues, so this is the wrong forum in which to air them.

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Replying to Mr_awol:
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By FactChecker
06th Mar 2024 12:44

. [the dreaded glitch strikes again]

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By More unearned luck
09th Mar 2024 16:29

What an odd attitude. Would it be the same if the director had caused £3K of damage to a different type of asset? Say I machine used to make its widgets? Or to some of the widgets waiting to be sold?

Perhaps the director shouldn't have mentioned the phone and to have said that a dog ran out into the road, as that might have upset you less.

I'd have thought that company would be the policyholder and it is therefore up to the company whether or not to seek indemnity and that the decision not to out of fear of increased premiums is a perfectly rational one and might be the cheaper option.

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Replying to More unearned luck:
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By FactChecker
09th Mar 2024 17:45

Good questions ... which caused me to re-read what OP wrote, unlike it would appear OP (who has remained resolutely invisible since posting).

And that raises some serious, non-accounting questions:
"One director was on his phone and went into another car at night .." sounds like at least one criminal act occurred (and may be the reason for any reluctance to go through official channels) - which potentially raises other concerns not for this forum.

And " (this) caused £3200 damage to a vehicle .." doesn't make clear whether the damage & costs relate to the company car or to a 3rd party vehicle - with the latter suggesting another law may have been broken (in not reporting it).

Finally, " .. he chose to repair to pay from the company profit rather than (via) his insurance" also suggests a planned future fraud (of not mentioning the accident at renewal time) which, if the case, would automatically void the insurance being driven under (thereby leading to further illegalities).

What a mess (even before getting to the heart of whose car / whose insurance)!

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