With many company car drivers now working from home or being furloughed, what happens to their company car benefit?

HMRC had remained silent on the provision of benefits such as company cars. By means of a refresher, current rules provide that:

  • A company car is taxed based on its availability for private use, irrespective of whether it is actually used privately.
  • Any reduction in the benefit in kind (BIK) value for periods of unavailability can only be applied when the period of unavailability is at least 30 consecutive days, preceded and followed by taxable periods.
How do these existing rules apply to the current situation?

We are all living under significant restrictions which limit our ability to travel as we once did. However, a company car is still available for private use even where there are such restrictions in place. The car is still available for a trip to a supermarket, to attend a medical appointment or collect a prescription even if it is not so used. As such a benefit in kind for the provision of a company car still exists.

What can be done to prevent a BIK arising when a car is not being used?

For a company car to be considered unavailable it must be physically be located somewhere not directly associated with the employee and out of reach of the employee to use. With the current restrictions on unnecessary travel and with many workplaces being closed, it may not be possible to physically return the car either to the employer’s premises or a designated storage depot.

In these current extraordinary circumstances HMRC have now confirmed that returning the car keys to the employer will be sufficient to demonstrate the car is unavailable. This is a helpful and sensible easement. Our recommendation is that this be documented in writing; a written declaration signed by both parties confirming that the car has been withdrawn and has therefore become unavailable for private use during this period.

If you have any questions or would like to discuss the impact of Coronavirus on your business, please get in touch with your usual Campbell Dallas contact.

The information in this update should not be regarded as financial advice. This is based on our understanding on 09 April 2020. Laws and tax rules may change in the future.