Is there any limit on company car expenditure?

Is there any limit on company car expenditure that the company can pay?

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We had a question recently about a director not realising how much his BIK would cost. On the flip side if the company has bought an electric company car then the BIK will be pretty low. Is there any limit to the amount the company can spend on the electric car?

For example if the director goes on holiday in it and the company directly pays for the ferry and the charging in France through it's chargecard account is that all okay? Or the company pays directly for the directors parking at the airport to take a holiday flight? (I'm just taking about revenue costs - do appreciate that if the company pays for accessories such as  a towbar or something that cost has to be added to the P11D value).

Actually the charging thing is a slightly interesting one when you look at the rules. Charging is not FUEL and there is no fuel BIK consequently. HMRC says the company has to pay for electric directly. If the driver claims back the cost from the company any payments to them have to be treated as remuneration.  However even if the company pays directly for charging and is billed by the card company then I think there is a bit of a grey area about how this should be treated for tax purposes - does anyone have any actual experience of this?

 

Replies (13)

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By Bobbo
13th Aug 2022 14:52

Dougscott wrote:

For example if the director goes on holiday in it and the company directly pays for the ferry and the charging in France through it's chargecard account is that all okay? Or the company pays directly for the directors parking at the airport to take a holiday flight?

Surely the ferry or airport parking for the director's holiday are quite clearly separate from the provision of the car benefit, they would be additional BIKs (if company contracts for these) or earnings (if director puts company's card details in when making a personal booking).

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Replying to Bobbo:
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By Hugo Fair
13th Aug 2022 15:04

Exactly ... I've just had to edit my response because it was saying the same as you.

BiK for the company-car is for the benefit of making it available to the employee, which is why Fuel is separate (as are parking charges, ferry charges, and so on).
Fuel is distinct partly because it can be a considerable sum, but mostly because it takes account of the business/non-business utilisation.
Whereas the other items mentioned are not directly related to the company-car ... just things where it was used (as opposed, say, to the employee's private car) ... and are subject to the usual rules for BiKs & Expenses (as per Bobbo's examples).

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By Paul Crowley
13th Aug 2022 15:09

I would not consider ferry costs to be motoring costs in the normal way
Not yet come across anyone trying to make such a claim
I would worry about it when I see it
I have only 2 companies providing cars as BIK
One is an EV, a Porsche with the director claiming that the BIK should still be zero. He gets £150K income despite having only 45% of the shares
I would allow it on him, were he going to see the sole customer, that is a company in Europe
It would be odd though, as he usually flies
Why would he decide to drive?

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Replying to Paul Crowley:
paddle steamer
By DJKL
17th Aug 2022 09:22

Ferry costs would be motor & travel costs if incurred during a business trip. (You just need a few clients up in the Hebrides, a lot time ago I spent 6 weeks a year up there working on audits as the firm I was with had previously had an office in Stornoway)

Anyone got a view on bridge tolls?

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Replying to DJKL:
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By Hugo Fair
17th Aug 2022 10:50

Shame ... I initially mis-read that as bridge trolls!
Ah well, "Trip, trap, trip, trap".

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Replying to Hugo Fair:
paddle steamer
By DJKL
17th Aug 2022 11:13

Personally I back the Trolls, it is surely their bridge, they invested in it but along comes a freeloader goat who seems reluctant to pay- sort of reminds me of Accounting Web.

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By Paul Crowley
13th Aug 2022 15:05

Fuel
It is just too new
WE need some tax cases before the rules are truly known.
Given the small figures involved, that may take some time

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By David Ex
13th Aug 2022 21:18

A very thought-provoking question you have there, Doug.

Dougscott wrote:

For example if the director goes on holiday in it and the company directly pays for the ferry and the charging in France through it's chargecard account is that all okay? Or the company pays directly for the directors parking at the airport to take a holiday flight?

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DougScott
By Dougscott
16th Aug 2022 21:10

OK, I will do a bit more rsearch on the actual wording of the legislation as there seems to be a bit of uncertainty so far. The BIK is supposed to cover personal use of the car (however big or small the BIK amount is) so logically it should cover all running costs, including perhaps parking the car either for business or personal purposes. Certainly HMRC haven't caught up with the idea of electric "fuel" yet!

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Replying to Dougscott:
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By Tax Dragon
16th Aug 2022 22:43

Dougscott wrote:

Certainly HMRC haven't caught up with the idea of electric "fuel" yet!

You might want to read EIM23900, in which HMRC gives a pretty good analysis of electricity as a non-fuel.

In fact, depending on how you get on with the legislation, you might want to look at EIM in relation to your question about parking at airports.

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DougScott
By Dougscott
16th Aug 2022 23:39

I've spent a little time reading ITEPA 2003 around the subject. Where a "taxable" car is provided (ie BIK is paid) then it seems the related expenses of the provision of a car are exempt from tax where paid by the employer. I also looked at the provisions of travel and subsistence expenditure and there is no mention of parking charges that I could see (although the BIM says subsistence includes parking despite it not saying this in legislation that I can find so far....). All slightly vague!

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DougScott
By Dougscott
16th Aug 2022 23:40

I've spent a little time reading ITEPA 2003 around the subject. Where a "taxable" car is provided (ie BIK is paid) then it seems the related expenses of the provision of a car are exempt from tax where paid by the employer. I also looked at the provisions of travel and subsistence expenditure and there is no mention of parking charges that I could see (although the BIM says subsistence includes parking despite it not saying this in legislation that I can find so far....). All slightly vague!

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By Mr_awol
17th Aug 2022 12:14

On first look i thought the private ferry and airport parking were slightly daft questions - but in looking for an easy link to demonstrate that, found there not to be one (or maybe there is, but i haven't found it and wouldn't want to put that much time into it) and yet there are a few pages which could make this look like a grey area.

The best linkable information i can find is EIM21686 which should allow a conclusion to be drawn*. This clearly refers to penalties for illegal parking but also has a rather helpful summary of the different outcomes for various situations, depending on whether a personal liability has been imposed on an employee.

*The other thing to consider is that there are various mechanisms for obtaining parking rights but most of them involve the driver of a vehicle entering into a contract with the landowner or their agent. The private parking code of practice is quite helpful here (s2.30) as a point of reference. Where an employer contracts for parking there may be exemptions (s237 ITEPA)

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