17 Apr Can BiK Company Car Tax Be Removed for Furloughed Employees?
The current Europe-wide lockdown means that large swaths of company cars driven by furloughed employees are likely to be parked up and unused.
This does raise the question of the need to pay Benefit in Kind taxation on a benefit that is no longer being enjoyed.
Currently, in the UK, unless a company car is unavailable for 30 consecutive days then the employee is liable to benefit-in-kind taxation during the whole period.
HMRC state that a vehicle left at the driver’s home during a period of furlough is still considered available to that employee. One option that we believe is being considered by some employers is to SORN [Statutory Off-Road Notification] the vehicle. However, even if a company could organise the relatively complicated task of putting vehicles into SORN under present conditions, HMRC are not accepting this as proof of unavailability.
Further clarification is expected from HMRC regarding car taxation but they do accept that the usual practice of making a car unavailable by returning it to the employer is impractical under current conditions of non-essential travel and social distancing.
Therefore they are prepared to accept that where there has been a “virtual” return of the vehicle, where the employer is in possession of all keys and fobs related to that vehicle, and the employee does not have the authority to request the keys are returned, then that would make the vehicle unavailable.
The industry has responded positively to this news, but some pressure is being applied to reduce the period of unavailability from 30 days to 21, in the event that, however unlikely, travel restrictions are lifted.
Although the virtual return may be an interim solution, there are certain considerations the employer must take to ensure any key/fob returns are managed appropriately:
- A suitable audit trail will be required to show the return of the key/fob and the subsequent unavailability of the vehicle. This is more challenging when support offices may be currently unattended
- Parked vehicles with no means of being moved can cause hazards in an emergency, especially if parked on the street, and even if they are parked on the driver’s driveway they will still need to be moved for urgent access.
- The security of the vehicle needs to be considered and its condition at the point of “hand-back” needs to be established.
- If the vehicle is parked up for a lengthy period, which does not seem implausible under current conditions, then the usual long-term vehicle storage considerations must be made [flat batteries, seized brakes etc]
It is hoped that UK government will provide some further clarity on this issue as car tax liabilities could have a huge impact on furloughed employees currently only receiving 80% of salary.
Back to Blogs Back to Case Studies List