ASE Coronavirus Update 24th April

Furloughed employees with company cars which are not been used in the lockdown could save thousands of pounds in tax by returning the car to their employer. 

A taxable benefit arises from having a company car when that vehicle is made “available” to the employee for their private use.

The rule is relaxed if the vehicle was not available for 30 consecutive days or more. 

The same applies if the employee is provided with private fuel.

HM Revenue & Customs have advised that if employees are able to hand the car back to their employer then it will not count it as available.

Whilst the normal procedure would be to physically hand over the vehicle, HMRC have accepted that this could also be done by posting the keys back to the employer.

A spokesperson for HMRC commented that “…., we recognise that under the current circumstances it may not be possible to hand the car itself back. 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.”

Where the keys are handed back to the employer, it would be prudent get a receipt and take photos of both being returned. The employee should also save any email correspondence with the employer about handing them back.

Alternatively, employers looking to help their staff in this situation could introduce a policy banning private use of company cars. This would provide good evidence for employees to show to HMRC that combined with its logs, could also show the car was not used.

However, if the car is retained and used, the full benefit in kind will apply.

Depending on the make and emissions of the car, doing this could potentially save someone thousands of pounds. 

Employers and employees should make sure that if the car is returned contact is made with HMRC to amend the tax code to reflect the non-availability of the car otherwise tax will continue to be collected as if a car is a benefit in circumstances when it is not.

If you have additional questions which have not been addressed above please contact Chris Cummings on 07896 117908 or by email chris.cummings@ase-global.com

Or visit our LinkedIn page for more info:https://www.linkedin.com/company/ase-plc/