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What is the tax treatment of short-term car hire?

What is the tax treatment of occasional short-term car hire for a limited company and employess?

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If employees are provided cars on a short-term rental (1 to 3 days) for business trips, what is the tax treatment for the employer (limited company) and employee?  Can the company deduct the cost from profits to reduce CT, can VAT be reclaimed?  And for the employee do any BIK liabiities arise?

I've looked at the HMRC manuals at https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim47740 but these seem to be about long term leases.

 

Replies (17)

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By Accountant A
22nd Feb 2020 12:25

You "sell software products to businesses made by a manufacturer".

https://www.accountingweb.co.uk/any-answers/vat-treatment-of-cash-incent...

Accountants sell professional tax and accounting advice. You need to consult your accountant.

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Scalloway Castle
By scalloway
22nd Feb 2020 12:26

From an earlier thread

Steve Kesby wrote:

By reason of employment

In order to have a car benefit, there are two essential elements:

the car must be available for private use (without a transfer of ownership), andthat availability must arise by reason of the employment.

If the employer company arranges and pays for the car hire, then arguably there's a BIK, albeit for a short period. I wouldn't expect HMRC to pursue the point though, because of the alternative.

If the employee arranges and pays for the car hire though, then availability can't be by reason of the employment (because the hirer isn't aware of the employment). He can then seek reimbursement form the company and has a valid claim under S.337 ITEPA 2003.

https://www.accountingweb.co.uk/any-answers/short-term-car-hire

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By memyself-eye
22nd Feb 2020 17:45

No, none. nadda, nyet, nicht, nein, non, nowt, nothing can be claimed. Does that answer your question?

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RLI
By lionofludesch
22nd Feb 2020 18:43

Cost deductible in full. VAT reclaimable in full.

Never heard of HMRC pursuing such a trivial sum for BIKs. On a typical car, it'd work out at tax on £20 a day.

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Replying to lionofludesch:
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By Tax Dragon
22nd Feb 2020 19:33

lionofludesch wrote:

On a typical car, it'd work out at tax on £20 a day.

Does that include fuel?

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Replying to Tax Dragon:
RLI
By lionofludesch
22nd Feb 2020 19:47

Who cares ?

HMRC aren't interested anyway.

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Replying to lionofludesch:
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By Tax Dragon
24th Feb 2020 10:39

lionofludesch wrote:

Who cares ?

HMRC aren't interested anyway.

I was thinking back to this thread: https://www.accountingweb.co.uk/any-answers/company-car-fuel-benefit-par...

A small benefit can give a big tax charge.

Non relevant to the case in point, I'll concede. But I think it's better to rely on legislation where you can (as is the case here), not indifference (your own or HMRC's).

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Replying to Tax Dragon:
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By The Dullard
24th Feb 2020 10:48

The difference between this situation and the situation per the link is that in this situation the car is only available for a short amount of time (meaning any fuel benefit is apportioned), which is different from where the car is available all year and fuel is provided as a one-off. Very different animals. Oranges and apples.

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Replying to The Dullard:
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By Tax Dragon
24th Feb 2020 10:51

I agree (hence my "not relevant..").

Curiously, it's the same ITEPA section deals with both fruit types.

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Replying to The Dullard:
RLI
By lionofludesch
24th Feb 2020 11:19

The Dullard wrote:

The difference between this situation and the situation per the link is that in this situation the car is only available for a short amount of time (meaning any fuel benefit is apportioned), which is different from where the car is available all year and fuel is provided as a one-off. Very different animals. Oranges and apples.

Exactly.

Not to mention that the OP says that this hire car was for a business trip.

Not for swanning off to the seaside.

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Replying to lionofludesch:
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By The Dullard
24th Feb 2020 11:24

But he might have made a journey between his home (or another non-workplace) and a permanent workplace in it. Which I think is where the others are probably coming from.

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Replying to The Dullard:
RLI
By lionofludesch
24th Feb 2020 11:35

Point taken, Dulls.

Also - was it available for private use ? Yeah, probably.

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Replying to lionofludesch:
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By Tax Dragon
24th Feb 2020 13:43

lionofludesch wrote:

Point taken, Dulls.

Also - was it available for private use ? Yeah, probably.

Exactly.

My previous point (probably lost by my subsequent wondering whether an orange was a fruit or an animal) was to provide you with some feedback. Nothing more.

HMRC pursues - and successfully taxes - situations where there is no (financial) benefit at all. The BIK rules are divorced from reality; recent changes have (IMHO) widened that divide. "Who cares?" leaves yourself open to, shall we say, misinterpretation.

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Replying to lionofludesch:
Psycho
By Wilson Philips
22nd Feb 2020 19:51

You don’t think there is any restriction on input VAT recovery?

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Replying to Wilson Philips:
RLI
By lionofludesch
22nd Feb 2020 21:50

Wilson Philips wrote:

You don’t think there is any restriction on input VAT recovery?

Nope.

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Replying to Wilson Philips:
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By paulwakefield1
24th Feb 2020 08:13

No - See VIT53900

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By kestrepo
24th Feb 2020 10:30

Treat this car hire as a normal business expense. No need to involve Benefits in Kind if the hire is solely for business purposes. In my experience it makes good business sense to ask employees to use a hire car rather than there own vehicle. Hiring a car often works out cheaper than paying an employee mileage - especially at 45 pence per mile. This combined with the fact that hire cars will be covered by specific motor insurances and are contracted to have been maintained to a specific standard gives further indemnities to the business.

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