Car - fully does it
Q Do you run your own business?
Q Does your business own cars?
Q Are you, your spouse or any of your family members employees or office holders in the business?
If you can answer yes to these three questions, then you need to be aware of the benefit in kind that can arise on the provision of an employer provided car, more commonly referred to as the 'company car'.
A car benefit can arise where:
- a car is made available
- to an employee or office holder (low paid employees may be exempt)
- or to a member of their family or household
- by reason of the employment and
- is available for private use.
As you can see, the rules are specific and HMRC interpret them very widely. For example, HMRC have been known to argue that a car placed in storage, with no tax disc, insured third party only and with no wheels was available for private use - it could be cherished and admired by the employee! Mind you, it was a Porsche!
Not only did HMRC wish to assess the value of the car for several years, they also wanted to tax the provision of private fuel for the car paid for by the company. The potential bill ran into tens of thousands of pounds.
There are a number of situations where no car benefit charge will arise in respect of a car that is made available and actually used. These are where the car:
- is one that the employee is specifically prohibited from using for private purposes and which is not so used; or
- satisfies all the conditions to be treated as a pool car; or
- is used by a disabled employee under certain conditions; or
- is an emergency vehicle used under certain conditions.
The most common argument to try and escape from a potential charge is that the car in question is a pool car. However, in order for this argument to hold water, the car needs to satisfy all the following conditions:
- it is available to, and actually used by, more than one employee;
- it is not ordinarily used by any one of them to the exclusion of the others;
- any private use of the car by any of the employees is merely incidental to its business use; and
- it is not normally kept overnight on or in the vicinity of the home of any of the employees.
It is not impossible to satisfy these tests but HMRC would expect to see proof. As HMRC say, whether the conditions are met is a question of fact. Particularly useful is a full mileage log, indicating the date of the journey, the driver, the mileage of the car at the start and end of the journey and where the journey was to.
As you can see, the company car rules are very widely drawn and easy to fall foul of. Please contact us if you would like to discuss these rules and policies in more detail.
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