Renting a company vehicle to a Director's son

Renting a company vehicle to a family member of the Director

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A small, VAT-registered, limited company (actively trading in the IT consultancy sector) is considering whether to buy a vehicle that will be made available for rental. The most likely person to rent the vehicle will be the Director's son, who is not connected with the business. The renter would pay a rental fee (including VAT) that would be slightly less than the usual commercial rate for vehicle hire. What's the problem with this proposal?

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Portia profile image
By Portia Nina Levin
05th Dec 2017 15:42

There's a benefit in kind for the director, where:
a vehicle is made available for private use to them or a member of their family, without any transfer of property in the vehicle to them.

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Replying to Portia Nina Levin:
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By Taxing_times
05th Dec 2017 17:17

Thanks. I'm aware of the BIK rules but in this case the vehicle would be available for rent and the rental income would be shown as such in the accounts. The renter for most of the time (possibly not all) would be the D's son. Would this generate a BIK liability?

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Replying to Taxing_times:
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By Tax Dragon
05th Dec 2017 17:25

Sorry, but I'm tired. No offence meant, but although you may be

Taxing_times wrote:

aware of the BIK rules

you are leaving yourself open to being asked whether you know what those rules are.
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Replying to Taxing_times:
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By Tax Dragon
05th Dec 2017 17:29

If you are relying on s117(3) to disapply s117(1), you are likely to be disappointed.

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paddle steamer
By DJKL
05th Dec 2017 17:00

In addition insurance may scupper, company likely needs cover on a vehicle it owns but rents to others, insurers will charge far more for this than they would re a straightforward policy re own/employee use.

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Slim
By Slim
05th Dec 2017 17:40

Why do they want to do this? What’s the benefit?

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Replying to Slim:
RLI
By lionofludesch
05th Dec 2017 18:57

Ah - we'd need the list price of the car and its exhaust emissions to work that out.

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