Can a company car be made available when on SORN?by
Can a company car subject to a statutory off-road notification (SORN) be “made available” to an employee? Lucy Webb reports on a first tier tribunal case that tackled this question.
Tim Norton Motor Services Ltd (TNMS) runs a Ford car dealership, which listed Timothy Norton and his wife as directors at the time of the initial assessments that triggered Norton’s appeal to the first tier tribunal (TC07973).
TNMS owned two expensive, rare cars: in 2001 a Maserati; and in 2005 a Ford GT40 (a classic high-performance car).
Both cars had been used for the company’s business: the GT40 acted as an attraction to the dealership, both when at the premises and when taken to various shows, as it was a crowd puller that led to conversations and sales.
The business use of the Maserati was more focussed on business meetings with advisers and attendance at Ford customer development events.
The two vehicles were kept at the company’s premises and neither was used for ordinary commuting. The keys for both cars were kept locked away and only Norton had access. The tribunal found that Norton’s wife would not have sought access to those keys.
Following a PAYE audit in 2016, HMRC concluded that both cars had been made available to Norton for periods longer than those in relation to which a benefit in kind had been declared.
HMRC issued national insurance determinations to the company for the years 2010 to 2017, made income tax assessments on Norton for the years 2012/13 to 2014/15 and 2016/17, and issued a closure notice for 2015/16.
These determinations, assessments and notices were the subject of appeal by Norton that was decided by the FTT last December
Section 114(1) of the Income Tax (Earnings and Pensions) Act 2003 specifies that benefits in kind will apply to a car that is made available to an employee, by reason of their employment; and is available for their private use. A director of a company is treated as one of its employees for these purposes.
Although the extent and nature of the use of the two cars by Norton in the relevant periods was not completely clear, the FTT decided on the evidence available that it was likely:
- the Maserati was used by Norton for both personal and business purposes in years 2011/12 to 2015/16, but it was not used in 2010/11 or 2016/17
- there was use of the GT40 by Norton in 2011/12 and 2013/14 to 2016/17, but the car was not used by him in 2010/11 or 2012/13. Further, the usage in 2011/12 was for business purposes only, but from 2013/14 the car was also used for private purposes.
The FTT noted that, in the years in which there was at least one time when a car was actually used by Norton in a manner accepted or condoned by the company, the car was to be treated as having been made available to him in that year for the purposes of section 114.
However, in the years in which the FTT found that a car was not used by Norton (namely the GT40 in 2010/11 and 2012/13 and the Maserati in 2010/11 and 2016/17) the question arose as to whether it was “made available for use”, even though it was not used.
Broadly, the taxpayer put forward two arguments on the made available question:
- After the GT40 or Maserati had been used, a SORN would be made. The taxpayer argued that the cars were not available (and so could not have been “made available”) when they were subject to a SORN, because their use on the road would have been illegal, subject to limited exceptions (eg driving to an MOT test).
- The company’s handbook contained a passage that stated that a company vehicle could not be used without the express permission of management.
The FTT dismissed the SORN argument, finding that a SORN did not prevent the car being available as it could be relatively easily remedied.
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