HMRC adjustment on company car tax could go further still
A move by HMRC to adjust the treatment of company cars for tax purposes has been welcomed by chartered accountants MHA MacIntyre Hudson, which says there could be further adjustments still.
According to Nigel Morris, employment tax director at the firm, the recent announcement from HMRC that company cars will not be seen as available for Benefit-in-Kind tax purposes where they are ‘virtually’ handed back by returning keys and fobs has been welcomed in many quarters. It follows comments from the Association of Fleet Professionals (AFP) that the Government should explore the impact of the lockdown on company car and van Benefit-in-Kind taxation with a view to suspending BiK during the crisis.
In a statement, HMRC has said that a benefit charge applies where a car is made available for private use, whether or not it is so used and that ordinarily it would expect that the car is handed back to the employer so that it cannot be used.
But a spokesperson added: “However, we recognise that under the current circumstances it may not be possible to hand the car itself back, so exceptionally, we would accept that where all the keys (or tabs) are in possession of the employer, and the employee does not have the authority to request the keys are returned to them, the car would be unavailable.”
In response, Nigel Morris said: “HMRC’s decision that company cars won’t be seen as available for Benefit-in-Kind tax purposes where they are ‘virtually’ handed back, by returning keys and fobs, was a positive move.
“However, it perhaps does not go far enough in dealing with the associated issues of having a car that can’t be accessed, moved in an emergency situation or maintained – which the industry and HMRC may need to consider. HMRC could further support businesses by amending the ‘unavailability rule’ relating to consecutive days of unavailability to 21 days, from the current 10 days. Otherwise even handing back may not save benefit in kind tax for drivers, or National Insurance Contributions for Employers if the car is reinstated within 30 days.”
Morris also said there was also the burning issue of private fuel benefits to consider.
He explained: “Even if a car is not withdrawn the private fuel benefit can be, as this does not need a physical return of the fuel card. It will, however, need a change of policy and employee agreement to proportionally reduce their benefit while the car remains unavailable. Companies wishing to make this decision need to take action by 6 April and should speak to their advisers urgently for the appropriate guidance.”