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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