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  I also recommend a written declaration signed by both parties is in place to confirm the car is withdrawn and unavailable.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
Barbara Nicholas
25th May 2022 A Grim Reap?

We work hard to improve our lot and most of us hope that our loved ones will reap some benefit from our endeavours. But assuming that we don’t manage to spend all the fruits of our labours, the taxman is lurking. And he will take a sizeable chunk if we don’t plan sensibly.   The…

Jake Day
17th May 2022 We’re Hiring: Tax Careers at Whitings

With a vacancy now open for a Trainee Tax Technician in our Bury St Edmunds office, we’d like to give you a closer look at the highlights of choosing a career in tax – and also the highlights of choosing Whitings as your employer. Why choose tax? The common misconception with a career in tax…

Peter Brown
16th May 2022 e-Commerce: Are you finding keeping your business’s records a nightmare?

Understanding how to account for your business’s transactions with online selling platforms can be complicated. Ensuring that you are submitting the correct information to HMRC can be tricky as not all platforms have the same VAT treatment.   A2X could make your life easier by saving you time and headaches from the complex world of…

Louise Bassett
10th May 2022 Defra Announce 50% BPS advance

As farmers face being squeezed with price increases for inputs due to the situation in Ukraine and worldwide gas and energy prices, DEFRA have announced that the RPA will advance 50% of the value of BPS payments to farmers from the end of July 2022 with the balance to be paid from December as normal.…

Luke Bacon
10th May 2022 HMRC starts chasing up SEISS overpayments

HMRC has started to recover overpayments of Self-employment Income Support Scheme (SEISS) grants. From April, HMRC is writing to taxpayers whose entitlement to the fourth or the fifth SEISS grant has reduced by more than £100 to ask them to repay amounts that were overpaid. Entitlement to the fourth and fifth SEISS grants can be affected…

Charlie Whittle
5th May 2022 TRS – Information required and annual declarations

Intended as a companion to: TRS Who should register and when. The TRS will collect information about the trust and its trustees, settlors and other individuals or organisations exercising control. This will include: Name of the trust. Date the trust was created. Whether the trust is an express trust or not. Details of the trust…