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1918

how many miles counts as insignificant

Company van - insignificant use

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New client, small company with sole director/shareholder and one van doing deliveries for a distribution company working for the likes of Amazon etc..  Self-billing invoices from distributor pay a daily rate and mileage calculated on the route they provide.  In the first year, the total mileage paid for by the distributor plus travel to and from the depot account for all but about 800 miles of what's shown on the odometer (28k miles).

Looking at the HMRC guidance and the examples they use I can ignore the weekly shopping as the cheapest diesel in the area is at Morrisons, his only hobby is fishing which, seems to me to be a solitary activity rather than a social one and he uses two reservoirs within 5 miles from home.

Since his first few weeks on probation, he has been working 6 days a week on routes which average between 7 and 9 hours not counting getting to the depot and loading up etc. so a week's holiday has not been on the cards.  

Do you think it's safe to call his private use insignnificant?

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21st May 2019 16:24

Well, according to HMRC, significant means 20%+. So, not significant must be less than 20%, and insignificant somewhere below that. Negligible, is IIRC, 5%, and I'd have thought that insignificant was greater than negligible. Your guy's at 2.9% which is negligible, and by my analysis both insignificant and not significant.

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to Vile Nortin Naipaan
21st May 2019 16:46

I thought 20%+ was "substantial" and "negligible" was "substantially less than 5%" (which, I guess, must mean 5% less 20% of 5%... or 4% to you and me).

HMRC's guidance seems to suggest that (in its view) insignificance is lacking if there is quality or regularity to the private use. There may be other tests.

But they're making that up every bit as much as you have made up your tests (don't forget your profile no longer contains that disclaimer...).

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21st May 2019 16:58

On what basis have you concluded that getting to the depot is not private use?

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By nutwood
to Tax Dragon
21st May 2019 20:19

The director's home is the registered office and the admin base (laptop) and so on. This location is the company's only place of business and the only place where it can be certain that damage to or theft of the van will be noticed as the alarm is within earshot of the director. It is also the location where oil, antifreeze, screenwash, bulbs and tools necessary for the routine maintenance of the van are stored.

This is equidistant from three of the distributor's depots and because of this it often happens that he is called upon to operate from any of the three at short notice. On occasion he has also been called out to take over from a broken down vehicle in mid delivery round.

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to Tax Dragon
21st May 2019 22:08

Surely getting to the depot would be business travel. The only alternative would be ordinary commuting, which is excluded, subject to the insignificance test. Talking of which, it would be helpful to know how often he goes fishing.

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to Wilson Philips
22nd May 2019 09:26

"Surely" is surely overstating it.

Delivery drivers don't make HMRC's approved list of homeworkers (EIM32775). (Hardly surprising, that, TBH.)

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to Tax Dragon
22nd May 2019 10:26

If an individual is required, in the performance of duties for his employer, to drive to a depot to collect parcels, I consider that to be business travel. It is no different, in my view, to my asking a member of staff to visit a client directly from home.

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to Wilson Philips
22nd May 2019 10:48

The OP was using a homeworking argument. I assume you don't accept that argument?

As for yours, yes, fair point, although HMRC might take a different view if the member of staff worked at the client's premises 6 days a week, 52 weeks a year. Even if, as is apparently the case here, the client had premises in three locations and the member of staff worked at all three.

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21st May 2019 23:34

No, it’s not safe to treat it as insignificant. Regular trips to 2 reservoirs for private leisure purposes not in the course of normal activities would rule that out, notwithstanding any other considerations. Would you really try to argue that at tribunal? I know that I wouldn’t, but you may feel differently.

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22nd May 2019 08:53

The way I see it, he's either doing 16 miles every Sunday or 2 miles a day every day.

That's quite a lot of use - whether because it's a significant journey every Sunday or because the use is daily.

(No doubt it's some and some... but...)

Does it matter though? Doesn't the BIK charge come out again at step 7 of the s54/IR35 comp?

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to Tax Dragon
22nd May 2019 11:06

I disagree. With both you and Tim.

Insignificant must have a context. If the van is only driven 8,000 miles in a year, then clearly the private use is not insinificant.

In the context of it being driven 28,000 miles in a year though - to answer Tim's question to the OP - I would look to argue that it is insignificant.

As you have correctly suggested, HMRC's manuals carry no weight legally. In taking HMRC's comments at EIM22745 (and its examples at EIM22880), regard should also be had to its comments at EIM21613 (which have a different context). Whilst accepting that insignificant and not significant are different things, I think both fall to be interpreted most heavily in the context of WHY the van is provided, and the total amount of private use compared with the total amount of business use. The rest is all just HMRC bu88ery/b0ll0x, IMO.

Also, why do you assume that IR35 applies? Case law in this area has only found that such people are workers; which are not the same thing as employees.

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to Vile Nortin Naipaan
22nd May 2019 11:14

My IR35 comment was meant as a question.

I take your point on context. It's an argument. I'm not convinced it stacks up well against the manuals - and Tim's comment was about the "safeness" of the argument, which, in that context, is therefore lacking.

At the end of the day, the OP will need to decide on how bullish to be. A bit of risk v reward?

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to Tax Dragon
22nd May 2019 11:27

I suspect that one of the OP's issues is that long before one needs to consider any argument at tribunal, one must consider the issue of reasonable care., which is quite likely to present itself later.

Reasonable care does not involve taking HMRC's view as gospel. It does, however, involve documenting how, in the specific circumstances, one has applied HMRC's guidance, or why, in the specific circumstances, one disagrees with such guidance.

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to Vile Nortin Naipaan
22nd May 2019 14:55

Vile Nortin Naipaan wrote:

I disagree. With both you and Tim.

Happy to be disagreed with. As I said in my post it is a matter of what the adviser and/or their client is willing to argue. On the facts given I would advise my client against but can see other advisers might go the other way.

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By nutwood
to Tim Vane
22nd May 2019 19:58

Thanks to everyone for the comments. Where I have had similar situations in the past there has always been another smaller, more economical and comfortable vehicle available for most private mileage.

It's a shame he has to operate through a company as he would be much better off with private use restrictions on CAs and running costs as a sole trader. Although I have known him for about ten years (I sold him a ram for a small flock of sheep he had) he didn't bother to ask me about his new venture until just before his first year end, and didn't mention the company until he gave me his records a fortnight ago.

Although I warned him then that there would probably be a personal tax liability for private use, I didn't quantify it because I didn't know the details. I spoke to him at length this afternoon and he has instructed me to err on the side of caution.

Apparently the fishing mileage is increasing and whenever he gets two days off in a row he has found a good place in Wales. He loves his van as personal transport because he can get all his kit in easily along with a camp bed and stove!

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By lam_ac
to Vile Nortin Naipaan
24th May 2019 11:11

On a philosophical level I struggle to see how “insignificant” can be measured as a proportion of total mileage. The thrust of the legislation is surely to establish that a provided vehicle has no BIK implications because the personal use is insignificant. Measuring against a moveable target oh higher business uses potentially creates a construct where all personal use could be covered as it is “insignificant” against total use. Surely not the point in arriving at an equitable measure. Incidental seems fairer in some respects than insignificant.

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24th May 2019 12:55

Lol how we accountants love to argue about definitions of "significant", "insignificant" and "negligible". We are like anxious sheep, so eager to apply the tax laws forced upon us by our useless government that we can spend days and months arguing over petty definitions. Sometimes we can't see the wood for the trees.

The solution to this one is very easy, just phone the HMRC and let them guide you over their own rules. No need to guess in case you get it wrong and they start charging fines and penalties due your erroneous judgement.

Don't forget, it is the HMRC's job to shake us down for each and every penny they can get out of us and as we eagerly concentrate on ensuring they get each and every miserable penny from our clients, most people fail to even notice how the government wastes our precious taxes.

https://bit.ly/2xkMjpm

I suppose worst case scenario, even if your client had to deduct 800 private miles out of 28k in total, it would hardly break his bank. I just hope your charges for researching this very vexing situation, do not amount to more than the tax he would have suffered on his 800 private miles. Good luck ;-))

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By nutwood
to Nefertiti
24th May 2019 14:18

Unfortunately you seem not to understand how company vans with private use are taxed on the drivers.

There is a set figure for the BIK value of having the use of the van. For 2018/19 that was £3,350. That figure does not vary in proportion to the amount of private use.

The van was 2 years old when bought and cost £9,800. The director expects it to last 3 years. Over that period he will have paid tax on at least £10,050.

There is a separate charge for fuel of £633. If he pays for the fuel used privately, around £140, he will avoid that charge.

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25th May 2019 03:25

The test would be in my opinion is how oftern your client goes fishing.

If he goes every week I would suggest it is significant

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27th May 2019 00:33

I understand that the Captain of HMS Queen Elizabeth has had some experience of the pitfalls of using the company vehicle (a Ford Galaxy, not the aircraft carrier) for non-work activities.

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