This is the time of year that employers and employees deal with the reporting of Benefits in kind. Taxing times indeed…
The provision and use of company cars features in many of these returns, both the use of the car, and if provided, the cost of any fuel provided by the employer for private mileage. What may not be appreciated is that there is such an item as an exempt use of a car within benefits in kind.
Exempt Use Of A Car In Benefits In Kind
To be exempt, an employee must use the car in one of the following ways:
- Privately owned cars – You don’t have to pay anything on cars that directors or employees own privately.
- Cars available for business journeys only – Business journeys are either: journeys that are part of your employee’s duties, e.g. a service engineer travelling to an appointment or journeys an employee must make to get to a temporary workplace. To be exempt, you must tell your employee not to use the vehicle for private journeys and check that they don’t.
- Cars adapted for an employee with a disability – This includes cars with automatic transmission if the employee’s disability means they need this. These cars are exempt if the only private use is for: journeys between home and work or travel to work-related training
- Fuel that employees pay for – You don’t have to pay or report on fuel, including for private journeys, if either: employees buy the fuel for their own use or you buy it and they pay you back during the tax year, and their payment is equal to or more than the amount you paid.
- ‘Pool’ cars – You don’t have to pay or report on ‘pool’ cars. These are cars that are shared by employees for business purposes, and normally kept on your premises. You’ll have to pay if a pool car is driven for private use, or if a car is shared by employees and doesn’t qualify as a pool car.
Providing A Car To A Relative
Additionally, if you provide a car to a close relative you won’t have to pay anything if both the following apply:
- you’re an employer who’s an individual, e.g. a sole trader
- you’re providing the car to someone who works in your business, but only because they’re a close relative and not because they work for you (e.g. you give your child a car as a birthday present)
A close relative includes:
- your spouse or civil partner
- your son or daughter, and their spouse or civil partners
- your parents
- any other dependants or guests of your household
If you’re unsure about benefits in kind or any other tax and VAT issue, then please get in touch with us and we can help.