Company car pitfalls in the time of COVID-19

Recently we have received a number of calls regarding the tax treatment of the benefits in kind for company cars in the current strange times. With people working from home and over Zoom etc the need for a company car has changed and therefore how we look at the benefits has changed as well.

Company Cars
One of the few releases made by HMRC over the last year regarding tax and Covid was in relation to company cars. It discussed where the employee had stopped using the car due to Covid and was now working from home remotely doing calls. They suggest that to avoid any benefit for the period that they were not using the car they should simply send the car keys back to their employer. Therefore, they would have no ability to use the car even where it is sitting outside their home.

If that was their opinion, then that should be all that needs to be done. My only fear is that this goes against various tax cases. In particularly one where the employee had been removed from the insurance thus making it undrivable by them. HMRC still won this as it was said that that did not stop it from being available. This is even though it was illegal to drive. So, we hope that the sending back of the keys is sufficient and we do not have any overzealous inspectors arguing the case.

Pool Cars
This I feel is more of an issue. A number of companies have decided to take the car back to the director’s personal property rather than leaving it miles away at their place of work. Is this still a pool car? I can see there are going to be a number of cases of the next few years when HMRC look at this.

I feel that an argument can be had here to justify having the car kept away from the office but HMRC could still look into it and a lengthy enquiry could ensue.

If it can be said that the car is merely been moved to a home address to keep it safe and secure, then I do feel this will go some way to showing that having it at the address is within the rules. However, the car will still need to follow all the other rules such as it is available for all employees and that it is only insured for business mileage. A very careful log of any miles driven in it needs to be kept to prove it has not had any private miles.

It is very tempting if it is parked outside to use it for a private trip. I know of a number of occasions where people have fallen foul of this. Clients need to be extra careful. There are inspectors who have spent times walking around carparks looking for cars that may be company cars and taking numbers down. They then check these, and we have seen people who have gone to the supermarket or football match having been caught for a full benefit.

As I say above by following the ideas above you could have a sensible way forward and something to use if HMRC decide to enquire into the case. However, none of this is a guarantee that you have to concede if they are going to pursue these cases.