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Can a company car be made available when on SORN?

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.

22nd Apr 2021
Tax Writer
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Classic Ford GT40 sports car featured in first tier tax tribunal case
iStock_Ford GT40_sjo

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).

Access limited

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.

HMRC assessments

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

The legislation

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.

“Made available”

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.

Decision

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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Replies (16)

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RLI
By lionofludesch
25th Apr 2021 07:23

The SORN issue could have been easily remedied - but it wasn't.

Are we now deciding tax matters on what might have happened rather than what did happen ?

Thanks (6)
Replying to lionofludesch:
By Duggimon
26th Apr 2021 10:33

Agreed, it might be easy to remedy the SORN situation but the car, in my opinion, isn't made available for use until the SORN is removed.

Fatuous argument and a stupid decision, I'd appeal if the amounts make it worth doing so.

Thanks (4)
Replying to lionofludesch:
By Husbandofstinky
26th Apr 2021 10:34

lionofludesch wrote:

Are we now deciding tax matters on what might have happened rather than what did happen ?

Spot on

Thanks (2)
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By johnjenkins
26th Apr 2021 10:49

This a very interesting article. I understand the FTT decision as, although the car is SWORN, it is still available for private use. Perhaps the companies handbook should have read that no private use of the vehicle is allowed therefore the vehicle cannot be available for private use. Then again who is going to have a Maserati and Gt40 without giving them some welly now and then.

Thanks (1)
Replying to johnjenkins:
By Duggimon
26th Apr 2021 11:29

johnjenkins wrote:

... it is still available for private use.

IS available for private use does not have the same meaning as MADE available for private use which is what the legislation says and is why this decision is wrong.

Thanks (2)
Replying to Duggimon:
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By johnjenkins
26th Apr 2021 11:48

The company's handbook says that the vehicle cannot be used without "express permission" from the management. Therefore it is or made available for private use.

Thanks (1)
Replying to johnjenkins:
By Duggimon
26th Apr 2021 14:25

Private use is not possible without the SORN being lifted. The SORN was never lifted so it was never made available for use.

It could have been made available for use, but wasn't. The law doesn't say a BIK is created if it's possible to make it available for use, that would be ridiculous.

Thanks (2)
Replying to Duggimon:
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By johnjenkins
26th Apr 2021 14:43

The BIK was already in use so the car was already made available for private use. The FTT decided that SORN didn't make any difference. It's a bit like saying the car was having a service and I wasn't allowed to use it for a week.
I don't agree with the decision but I can see why FTT came to their conclusion.

Thanks (0)
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By Janski
26th Apr 2021 11:24

With cars such as these, they could easily be transported on trailers to a race track and driven to hearts content, with no need to cancel the SORN.

Thanks (1)
Replying to Janski:
RLI
By lionofludesch
26th Apr 2021 12:19

Janski wrote:

With cars such as these, they could easily be transported on trailers to a race track and driven to hearts content, with no need to cancel the SORN.

No need to cancel the BIK either.

It's being used.

Thanks (0)
Replying to Janski:
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By paul.benny
26th Apr 2021 13:29

That's another 'what might have happened'. There is nothing in the article to suggest that the cars were ever driven on a race track.

Thanks (0)
Replying to paul.benny:
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By Janski
26th Apr 2021 14:16

But it is a potential reason why having the vehicle on a SORN doesn't necessarily mean it can't be used.

Thanks (0)
Replying to paul.benny:
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By rbw
26th Apr 2021 17:21

There is also nothing in the legislation that requires private use. In that sense the whole charge is on the basis of "what might have...".

It might (or might not!) help to consider the position if the cars had been used while SORN'd. Would anyone argue that's not private use 'cos it's use that involves breach of the law?

Thanks (0)
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By paul.benny
26th Apr 2021 13:35

The management in a car dealership, can quite likely drive any car in stock at any time. Taking this judgement to its logical extreme would suggest that they should be assessed for bik on the entire stock.

Thanks (3)
Replying to paul.benny:
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By johnjenkins
26th Apr 2021 13:48

Or even on a pool basis.

Thanks (0)
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By carnmores
28th Apr 2021 13:46

common sense seems to have gone out the window here

Thanks (1)