Fleet News

Coronavirus: Company car tax benefit questioned during pandemic

Calls are being made for HMRC to examine the impact of the coronavirus lockdown on benefit-in-kind (BIK) taxation for company drivers.

Many businesses provide company cars to employees who have been either furloughed or restricted to staying at home and only undertaking essential travel.

In many cases their company car will be parked outside unused and some employers are even looking to SORN the vehicle as some will have no road tax, MOT or insurance during the ‘lockdown’ period.

Currently unless a company car is unavailable for 30 consecutive days and is available to the same employee before and after the period of unavailability it is liable to BIK during the whole period.

Nigel Morris, tax director at MHA MacIntyre Hudson, has contacted HMRC to see if it is possible as a temporary measure for the rules to be relaxed with the 30 consecutive days unavailable is reduced to (say) 21 days.  

This should mean ‘automatic’ application of the unavailability rules for most employees, saving them unnecessary BIK tax bills and saving their employer Class 1A NIC at a time when it is important to both restrict movement and ensure that people have as much money as possible, says MHA MacIntyre Hudson.   

However, Association of Fleet Professionals (AFP) co-chair, Caroline Sandall, says the subject should be placed in perspective among a whole range of more important issues during the crisis but that there was genuine cause for concern.

She explained: “Overall, there is a fundamental question of fairness here. Can you justify taxing people on a benefit when that benefit is not really available for use? That’s what is happening at the moment with company cars and vans that can’t be used except for essential travel.

“Plus, when you drill further down into the subject, there are a whole range of situations being faced by individuals.

“The current crisis will impact on all drivers of company cars and vans to a degree but potentially some much more severely than others.” 

Sandall says that among the hardest-hit are drivers who have been furloughed and could find it tough to pay their tax bill, while on only 80% of their usual salary.

“This is especially the case if they have an older car with a high CO2 figure on which the benefit-in-kind increased at the start of the new tax year,” Sandall explained.

Furthermore, she says there were other implications. For example, there were drivers who were expecting to have taken possession of a new company car with lower benefit-in-kind taxation but have had to hang onto their old car because delivery was currently impossible.

“If you were planning to be driving a new, lower emissions car or even an EV on April 2 that attracted very low or zero taxation, then it seems unfair if you are taxed on your four-year-old diesel and being charged an additional couple of hundred pounds every month.”

Sandall believes there is even a question of whether company car drivers should be able to SORN their vehicle during the lockdown period and avoid paying benefit-in-kind altogether.

“Some drivers will not be using their company cars at all because of their situation, perhaps because they have had to self-isolate or are part of an at-risk group,” she said.

“It seems plausible that they should potentially be given the option of opting out of their company car temporarily.”

Sandall says that the AFP is aware that other parties had raised the issue of BIK for fleets during the lockdown but it would be best if the industry spoke with one voice.

She suggested: “This is something that we believe should be raised with the Government and HMRC at the appropriate time and, as the leading body for fleet professionals, we are would like to act as the focal point for any co-ordinated activity undertaken across our sector.

“Job one, from our point of view, is to look at ways of recording potentially useful information regarding the driver and company car usage, including the dates of any furlough, the mileage they are covering and more. These might prove essential in any future discussions with the authorities.

“Ideally, of course, we would like to see a suspension of benefit-in-kind taxation on company cars and vans for the period of the lockdown but, given Government and HMRC current priorities, that may not be possible.”

HMRC told Fleet News that the benefit charge applies where a car is made available for private use, whether or not it is so used. 

For example, the spokesman said: "A car kept on an employee’s driveway during a period of furlough would still be considered to be made available. Neither would we accept a SORN declaration as proof of unavailability.

"Ordinarily, we would expect that the car is handed back to the employer so that it cannot be used. However, we recognise that under the current circumstances it may not be possible to hand the car itself back, 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."

To understand the financial impact on registering a company car from April 6 under the new BIK regime, see the latest analysis from Fleet News here.

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  • Robberg - 01/04/2020 10:46

    Interesting points made here but as Caroline Sandall says, there are much more important issues that have to take priority. Another issue is for drivers who would have taken delivery of their car prior to the WLTP changes on 6 April but could now be faced with higher benefit in kind. I understand that the BVRLA will be raising that with HMRC.

    • Sage & Onion - 01/04/2020 22:14

      Unless they had ordered a PHEV, in which case their BIK will be 2% points down the scale in yr 1 and 1% in yr 2. But of course they will be in their current car at a higher BIK % level in the short term.

  • Sage & Onion - 01/04/2020 10:57

    All suggestions to help individuals and businesses through this tough time must be considered and this is one that would be widely welcomed and is quite sensible, and probably easy to implement, to help promote the lock down and restrict all company car and van journeys to essential journeys only. I've had one car driver who's new low-BIK car has been delayed and has asked if we can send their current lease car back and hire them a low BIK car instead because their spouse has been furloughed, all their family is stuck at home using more electric and gas etc, and needs to cut the cloth accordingly. So this would be a useful tool to use. The only complication I can see is separating the essential workers from the non-essential workers. But if the essential workers are using their car only for business then there is no real BIK derived from private availability.

  • Dave - 01/04/2020 11:17

    It would also be interesting to know the impact of drivers expecting to register a new co.car in March, specifically arranged ahead of the WLTP changes, however now the delivery is delayed face a higher BIK charge and personal contribution as it will be registered after April?

  • Ian Housley - 01/04/2020 14:17

    I'm not saying that I disagree with the suggestion that company car owners should not have to pay BIK during the current crisis but my own personal car parked on my drive is still taxed, insured, has an MoT which will need to be renewed at some point and is still depreciating in value. So private car owners are experiencing "unnecessary" costs as well. In the grand scheme of things I think there are bigger issues that need resolving than BIK.

  • Ashley - 01/04/2020 15:31

    As much as I feel for some people in these situations let's put this into some context..... This ask is for <0.9m people and there are MILLIONS of people losing their jobs etc in this climate. Don't we think that the government are pouring enough money into this problem without asking them to come up with a temporary tax fix for a minority group? Is the car still available for private use - YES Will most people be using this car to go to the shops etc in for their essential shopping - YES Will the car be available post COVID19 (and be used) - YES Let's put another lense on this - what about those people who don't get a company car and have a finance agreement that they need to repay but they're not using their vehicle - should the government be funding their contributions as well?

    • Sage & Onion - 01/04/2020 22:10

      Contract Pauses are being requested and considered, and finance institutions are offering payment holidays, so help is available for private car owners who have one on a finance arrangement. But besides the fix for the minority group there will be savings for their employer's NIC bill, which could be the difference between jobs being saved or lost. And whilst this is indeed a minor issue in the bigger picture, there are essential workers still out there working but getting no private use other than commuting and they surely deserve some relief in whatever form it takes.

  • David G - 02/04/2020 10:59

    I was due to get a new vehicle delivered the week the country was effectively stopped, theferfore BIK will now be calculated on WLTP, rather than NEDC correlated i will pay approx £18 per month more in tax, yes minor in relation to other more serious issues facing a lot of people but when you add in extra increases in council tax, food etc it all adds up, and i am a key worker as defined by HM Government.sense may prevail

  • Vince - 22/04/2020 23:06

    Great article, I was looking for some news to see current rules around BIK during lockdown. I find it highly unfair that HMRC still expect full tax on a vehicle I cannot use as intended, and not because my company says so but the government says so. The whole thing is completely wrong. How can 1 very short essential trip weekly possibly be classed as a perk. I'd save my £180 a month I pay in tax and walk to the shop.

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