Does a BIK arise on jointly owned assets?

Where a company and its director own an asset jointly, does a BIK arise?

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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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By Justin Bryant
13th Apr 2022 17:29

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.

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Replying to Justin Bryant:
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By Justin Bryant
14th Apr 2022 09:55

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

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Replying to Justin Bryant:
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By paul.benny
14th Apr 2022 10:18

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.

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By Bobbo
13th Apr 2022 23:26

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!

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By SteveHa
14th Apr 2022 09:08

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.

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By Steve Kesby
14th Apr 2022 12:09

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.

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Replying to Steve Kesby:
By SteveHa
14th Apr 2022 13:08

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.

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Replying to Steve Kesby:
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By Justin Bryant
09th May 2023 11:16

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

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Replying to Justin Bryant:
By SteveHa
09th May 2023 13:05

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).

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Replying to SteveHa:
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By Justin Bryant
09th May 2023 13:17

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.

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Replying to Justin Bryant:
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By Tax Dragon
09th May 2023 20:40

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.

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Lone Wolf
By Lone_Wolf
27th Apr 2022 00:02

A belated thank you for all the responses here. It has given me some food for thought.

Having read the Christensen (HMIT) v Vasili 46 TC 116 case, it seems the deciding factor is that the director was using the car for more than 5% of the time. It was always at his disposal – in a proper 95%:5% ownership split, you’d expect to only have access to it for 5% of the time.

By providing him access to it for the other 95% of the time, the company was providing a benefit. The taxpayer argued that this should be taxed on the basis of an asset made available, and the special commissioner agreed. The final judge disagreed and believed that the car BIK rules were adequate to deal with the situation.

I believe, but obviously have no way of knowing, that if the split had been say 50:50, and evidence supported that the asset was legitimately used 50:50, then the decision would have been different.

It seems as though they lost the case based on the fact they were providing a benefit by allowing the director to use the car, for a greater period than his rights as co-owner would reasonably allow.

There are sections of that case that to me, indicate that an asset co-owned by employee and employer, could be used by the employee privately without incurring a BIK. From paragraph 15:

“ For example, if the car were jointly owned in equal shares by the employer and employee, and if the car were used equally for the business purposes of the employer and the private purposes of the employee, each would be exercising rights of use proportionately to the ownership rights, and the employer would not be providing a benefit to the employee.”

I haven’t looked at the Cooper & Others v R&C [2012] UKFTT 439 TC 02120 in as much detail, but a quick read through doesn’t flag anything major that would change my thinking. Westcott v Bryan (45TC476) provides some useful pointers.

Having had a good think about it, I think that if an asset (including car or living accommodation) is jointly owned between employee and employer, and the employees private use of that asset is proportional to their owned %, then no BIK would arise. Their use is simply arising from their right to use the asset as co-owner, and is not being “made available” by their employer, nor Is it by reason of their employment that it is available to them.

I don’t doubt that HMRC would disagree, and establishing the required evidence to support that it is being used in line with ownership % may prove difficult. But I believe there is a good case to be made.

The case I have is not a car, but rather an excavator owned jointly between Mr X’s Ltd company (contracting work), and Mr X which he uses in his sole trade (farming) – with no recharges for the use. The use in each business is broadly proportionate to their % ownership. I feel with the appropriate caveats to the client, the situation can continue as is, remaining compliant with the legislation.

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