Employees with company cars who are unable to use them because of the current lockdown are to be granted some relief on the tax they pay on their car benefit.
HM Revenue and Customs will not see cars as “available” for benefit-in-kind tax purposes if employees are able to “virtually” hand the car back to their employer – by posting their keys, for example.
The announcement has been welcomed by law firm MHA MacIntyre Hudson, which had been lobbying HMRC to relax benefit-in-kind taxation on staff with company cars. However, it has urged the government to go further to ensure employees with this benefit are not penalised while they are unable to use their vehicles.
“HMRC’s decision that company cars won’t be seen as available for benefit in kind tax purposes where they are ‘virtually’ handed back, by returning keys and fobs, was a positive move,” said Nigel Morris, employment tax director at MHA MacIntyre Hudson. “However, it perhaps does not go far enough in dealing with the associated issues of having a car that can’t be accessed, moved in an emergency situation or maintained – which the industry and HMRC may need to consider.”
Morris told Personnel Today that adjustments were usually made to the benefit-in-kind tax deductible from an employee’s salary if the company car was not available; if they were in for repair, for example. However, this relief is not offered if the period the car is unavailable is less than 30 days.
The law firm is now urging HMRC to lower this 30 day period to 21, to allow the relief to kick-in earlier.
“Otherwise even handing back may not save benefit in kind tax for drivers, or National Insurance Contributions for employers if the car is reinstated within 30 days [if the lockdown lifts],” Morris said.
Morris advised that employers should also consider revising their policies around private fuel benefit – for example, if they received funds for personal fuel use via company fuel card – if employees were unable to drive their company vehicles. This would prevent employees from being taxed on a benefit they cannot use.
“Even if a car is not withdrawn the private fuel benefit can be, as this does not need a physical return of the fuel card. It will, however, need a change of policy and employee agreement to proportionally reduce their benefit while the car remains unavailable. Companies wishing to make this decision need to take action by 6 April and should speak to their advisers urgently for the appropriate guidance,” he said.