Company cars and fuel during COVID-19

19th May 2020

If you are an employee with a company car, and maybe fuel provided, it is worthwhile considering giving up the car, or fuel, during the current pandemic if you are working from home or furloughed.

 

A company car benefit in kind (BIK) is a set amount based on the list price and emissions regardless of the amount of usage.  If you are not currently not using the car then it may be worthwhile giving up the car in the short term to reduce the tax you are paying, the BIK can be reduced for periods of unavailability.

 

Unfortunately this is easier said than done, if a car is “available” then a benefit in kind will arise, merely not using the car will not reduce the benefit; if the car is on your drive and you have the keys you will have a BIK.  HMRC has confirmed that returning the car keys to the employer will be sufficient to demonstrate the car is unavailable, which could be an option, or, if possible, move the car to a company depot/car park so it is completely unavailable to you.  I also recommend a written declaration signed by both parties is in place to confirm the car is withdrawn and unavailable.  Of course personal circumstances may mean you need the car even if for short journeys and this is not an option.  Note that to be “unavailable” for tax purposes the period has to be at least 30 days.

 

However stopping the fuel benefit, if you have one, is likely more worthwhile if you are spending very little on fuel at the moment.  Again the private fuel BIK is not based on the miles travelled it is a set amount based on emissions.  A private fuel BIK is ‘all or nothing’, if there is just 1 private mile paid for by your employer a fuel BIK will arise.  However it should be possible for an employer to stop paying for fuel and request you reimburse any fuel costs since 6 April 2020.  A written agreement signed by both parties also needs to be in place to confirm the requirement to repay the fuel.  Strictly such an agreement should  ideally be in place before the start of the tax year, but you would hope HMRC would relax this stance in the circumstances.  A word of warning though, if fuel is stopped and reinstated later in the tax year the BIK will arise for the whole tax year, so if it is stopped that will have to continue to at least 5 April 2022.

 

If a BIK is stopped then the company will also reduce their Class 1A NIC liability.  HMRC would need to be advised of any changes to ensure tax codes are updated to see the immediate tax reduction of any income tax changes.

 

Comparing the tax savings and checking the appropriate paperwork and procedures are in place is recommended.  Do contact us if you require any further information.



 
Other items in Blogs
 
Ian Piper
24th September 2020 Corporation Tax due soon: Not necessarily.

Companies with 31 December 2019 year ends will be due to pay their corporation tax on 1 October 2020. If that company is expecting to suffer a loss during the 2020 financial year, perhaps due to COVID-19 related reasons, it should be possible to carry that loss back one year and claim a refund of…

Read More »

Ruth Pearson
17th September 2020 Fuel Rates From September 2020

HMRC have updated the latest company car advisory fuel rates. These rates apply from 1 September 2020.   The guidance states that you can use either the previous or current rates, for up to one month from the date the new rules apply.   The new rates per mile are below: Engine size Petrol LPG…

Read More »

Robert Baxter
16th September 2020 Redundancy Pay & Payment in Lieu of Notice (PILON)

HMRC have introduced legislation which ensures employee’s statutory rights, including redundancy pay and payment in lieu on notice (PILON), are based on an employee’s normal pay and not their furlough pay.   Redundancy pay   An employee is entitled to redundancy pay if they have been working for their current employer for 2 years or…

Read More »

Ruth Pearson
15th September 2020 Coronavirus Job Retention Scheme and the Job Retention Bonus

We are halfway through September and this month sees one of the biggest changes to the current Coronavirus Job Retention Scheme (CJRS). Employers now pay 10% of furloughed employees’ wages to make up 80% of their total wages up to a cap of £2,500, with the wage cap being proportional to the hours not worked.…

Read More »

Richard Alecock
10th September 2020 Self Assessment Deadlines

Two self assessment deadlines are approaching:   5th October 2020 For those individuals who have not previously completed a tax return you will need to report to HMRC a liability for 2019/20.   31st October 2020 For those individuals who have previously submitted ‘paper’ self assessment tax returns, the deadline for the 2019/20 return is…

Read More »

Jaimie King
4th September 2020 New charity register

The Charity Commission has launched a new public register for charities – making information more transparent.   Using the below link, anyone can search for details of a charity which includes data such as financials, who the trustees are, and whether the charity fundraises from the public.   The Charity Commission wants members of the…

Read More »