Company car benefits during the lock-down

The issue

The current lock-down measures are likely to mean that many employees are at home with company cars sitting idle on the drive. Typically, at the moment, a household only needs one car which they are using infrequently.  The employee may feel aggrieved to find that even if they don’t use the vehicle because of the lock-down they will continue to incur a company car benefit charge.  This is because the benefits code applies to any car that is “made available” to the employee. 

HMRC take a very strict view on what classes as being “made available”.  For instance, HMRC do not treat cars as being “unavailable” simply because the employee is:

  • banned from driving;
  • out of the country on business or holiday, or
  • unable to drive the car for some other reason, for example illness or government travel restrictions.

Nor does the car count as unavailable simply because there is no current:

  • road tax (e.g. by registering the car as off-road via the DVLA);
  • MOT certificate; or
  • car insurance.

In these circumstances, the only practical way of ensuring that the car is not available is to ask the employee to return the keys to the company.  This may sound extreme, but given the reduced amount of driving taking place, employees with the use of another vehicle may be happy to temporarily hand over the keys in order to save on the benefit in kind charge.  A further point to note is that the car must also be made unavailable for a continuous period of at least 30 days in order to qualify for exemption.

Example

John (a 40% tax payer) drives a BMW 3 series with a list price of £32,000 and an emissions rate of 139g/km. This means that (using a 30% rate) he is taxed on an annual benefit in kind of £9,600 at 40% or £3,840 per year. By handing in the keys to his employer (for at least 30 days) John can save £320 per month.

Final word

This seems to be quite an easy and sensible piece of tax planning for multi-car households, however depending on what happens next Thursday this tip may be a bit late (because employees may once again need their cars).

Of course those with electric cars will not have to worry about benefit in kind tax this year because the rate is 0%. On that subject, if anybody is getting a TESLA then they can use this referral link to benefit from free 1,000 super charger miles:

https://ts.la/andrew35914

Sorry for the digression but I couldn’t resist!

 

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