As the UK responds to government guidelines of lockdown and essential travel only, many businesses and employees now find themselves paying tax on a company vehicle which is, at this time, rendered “non-essential” to their personal and working needs.
The reality that many employees may have a second, personal non-company vehicle, or where their food shop can be done on foot, many company vehicles are as a result not “turning a wheel”. Consequently, unnecessary tax is being paid on a benefit of no personal use.
There is, however, the option to remove this benefit charge from the employee during this period of time. By doing so, the employee is no longer faced with paying the relevant tax on their company vehicle for the period where the vehicle is not used.
Employers may also be aware, that the removal of this benefit results in the company no longer incurring Class 1A National Insurance during a period where the company vehicle is not required and not utilised.
Whilst the above actions are reasonable, it is important to highlight that HMRC will still require to see the appropriate practical measures have taken place in order to remove this company vehicle, from the employee, and thus satisfy the removal of the benefit charge on both the employee and the employer during this period of time.
For employees and employers looking to implement the above during the coronavirus crisis, there is a minimum period of time which this must be implemented for. The company vehicle must be removed from use for a period of no less than 30 days. Therefore, employees must be happy to have their company vehicle made wholly unavailable to them for at least 30 consecutive days. Any period of time which is shorter than this will be considered as a period of chargeable benefit by HMRC.
HMRC recommend the following actions take place in order to support the period of unavailability of at least 30 days:
- Physical removal of the company vehicle from the employee and/or keys handed back to an individual at the company.
- The employee should have no access to the vehicle. HMRC will accept that the vehicle is unavailable and that the employee is unable to gain access to the vehicle on the basis that they:
- Do not have access to the keys
- Do not have the power or authority over the individual who is holding the keys to hand them over
- Do not have the power to direct the person holding the keys to drive the employee to a location of the employee’s choice.
- Written agreement between employee and employer, prohibiting private use, and reiterating that the vehicle will be made unavailable to the employee for the period of at least 30 days.
- A log of the date that the vehicle was withdrawn from the employee and the date that the vehicle was returned and made available to the employee.
- A log of where the vehicle has been kept during this time of unavailability. For example, confirmation that vehicle is in a locked parking site/business premises.
Where the company vehicle has not been physically returned to business premises, or a similar location
, it is recommended that odometer readings and the use of trackers are applied. HMRC will expect to see proof that the company vehicle has not been used privately during this period of time. Thus, odometer readings on the date where the keys are handed back to the company, and again on the date that the company vehicle is returned and made available to the employee, will assist in corroborating this.
For employees who are also provided with a fuel benefit, the treatment of this can be stopped in line with the company vehicle benefit charge.
We would recommend that you do speak to your adviser before implementing any changes with regards to your company vehicle benefits. HMRC have yet to release any guidance which would suggest a “softer approach” to the current benefit guidelines and thus it is important that recommended actions are followed as far as possible.