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  I also recommend a written declaration signed by both parties is in place to confirm the car is withdrawn and unavailable.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
 
Angelica Hunt
19th April 2021 HMRC – Tax refund delays

A number of our clients are experiencing long delays in receiving tax refunds from HMRC.   HMRC attribute these to the need for them to perform security checks in order to combat fraudulent claims.  In some cases, HMRC need more information in order to verify genuine claims.   They may issue a verification letter, either…

Read More »

Ian Piper
15th April 2021 2021 SME Growth: Revenge Spending?

As we pass the Covid-19’s first anniversary of its impact on our area’s economy, accounts of local SME’s are now starting to show part of the damage they have experienced through the lock-downs and associated restrictive measures. Thankfully, through Government financial help and the nimble footwork of businesses adapting to survive, the overall effect upon…

Read More »

Jaimie King
15th April 2021 Life after CBILS: The Recovery Loan Scheme

The government-backed Coronavirus Business Interruption Loan Scheme closed on 31st March to new applicants. Thankfully, the government has put in place further support for businesses, to follow this.   The Recovery Loan Scheme – Government backed loans, 3 months – up to 6 years depending on the product – Up to £10m, no cap on…

Read More »

Vanessa Pearson
26th March 2021 6 April: A Guide to Off-Payroll Working Tax Rules

The proposed new rules apply regarding who determines IR35 status for freelancers hired by medium and large companies are imminent. Our Brief Guide will help find out how this affects you and what you can do: A Brief Guide to Off-Payroll Working Blog entry by: Vanessa Pearson

Read More »

Ben Kilby
25th March 2021 I hear a rumour…

I hear a rumour that Lloyds Agricultural banking team based in Edinburgh has been disbanded and merged within other teams around the country. Although some within the new regional teams may have some knowledge of agriculture it has been suggested that customers felt that this was not important. It seems that the agricultural specialism within…

Read More »

Fiona Mann
24th March 2021 Making Tax Digital – the next steps

Our MTD Group have produced Issue 5 of their newsletter giving details of Making Tax Digital (MTD) as it continues.   So if you are unsure of what to do next, our newsletter has information and advice how to proceed.  Don’t delay however as penalties will be introduced if submission deadlines are missed.   W&P_MTD5…

Read More »