What is the BIK position where a company jointly owns an asset with its director?
Say a car or a piece of machinery is jointly owned. Or even a farming company that owns half the farmhouse which the director lives in. The company and the director each stumped up 50% and are on the title of the particular asset.
If the director uses it privately 50% of the time, does a BIK arise? Does that count as getting private use of an employer’s asset, or, is he simply exercising his right of use as part owner, and it’s nothing to do with his employment?
I’m swaying towards no BIK, but that’s the answer I want, not necessarily the correct answer, so wondered what others thoughts were?
Replies (12)
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I don't think there's a BIK if everything is at arm's length* (so he'd need to pay 50% rent as a 3P joint owner wouldn't allow rent-free occupation) and I don't see the benefit of a parallel LLP structure here rather than simple joint ownership:
https://www.taxinsider.co.uk/taking-money-from-your-company-taxfree
*otherwise it's a very easy avoidance scheme.
This non-tax joint property ownership case has the detailed third party legal analysis: https://www.bailii.org/ew/cases/EWCA/Civ/2022/481.html
The point implied by the OP in referring to a farmhouse appears to be that the asset is both jointly owned and jointly utilised - although I doubt that the proportions in each case match. So in that case there might be no need for an arm's length rent.
As ever, we need more information from the OP about the specific scenario they are dealing with.
If the 'exercising right as part owner' logic worked then surely every company car would be 99.99% company owned, 0.01% employee owned and no company car benefits ever!
I don't think it works for a car. Remember car benefit is unusual in that the cost to the employer is of no relevance, and it is only the making available that is taxed, the benefit calculated by reference to the OMV when new. Irrespective of the proportional ownership, if the company has some ownership, then I think the full BIK is chargeable.
Bobbo and SteveHa are correct with relation to car benefit. See Christensen (HMIT) v Vasili 46 TC 116 where the employee's 5% ownership of his company Ferrari didn't prevent a full car benefit.
I'm not sure what point Justin is trying to make with his links. Certainly, a parallel partnership did not work to prevent benefits (most notably car benefits, as usual) in Cooper & Others v R&C [2012] UKFTT 439 TC 02120:
https://www.bailii.org/uk/cases/UKFTT/TC/2012/TC02120.html
I think, in other cases it will depend on the facts. How much provision is there by the employer and to what extent is what is being provided (by both employee and employer) used for the purposes of the business. Westcott v Bryan 45 TC 476 is likely to be relevant.
Interesting case, and one which I've not read before. It struck me odd that the judge took 29 paragraphs to understand (or vocalise) what I had realised by para 11.
Steve, I assume you've not read the links. Try start with this one: https://www.taxinsider.co.uk/taking-money-from-your-company-taxfree
I don't see how that addresses the car benefit (though you may be referring to something else that has slipped my mind in the past 12 months).
In the past 12 hours in fact. See: https://www.accountingweb.co.uk/any-answers/can-an-spv-own-half-a-proper...
I confess it's not really directly related to boring old car BIKs and is far more interesting re such jointly held property as potential (profit extraction) tax planning.
What's the difference between a boring old Ferrari and an exciting terrace? Both sets of rules have the anti-Apollo provisions, which disassociate the BIK from the benefit
I'm commenting based on SteveHa's post (that there doesn't have to be a benefit to be a BIK), assuming that was the point you were responding to.