Company Cars - Take Care

Q: I have a construction company and have had a visit from HMRC. This was supposed to be about our PAYE, but the inspector spent most of their time quizzing us about our company cars and vans. We have a car which is used by different directors and managers so our accountant told us it was a pool car. HMRC seem to think differently – what are the rules...
 
A: Company cars continue to cause complications, and HMRC are particularly hot on pool cars. It’s very tempting to think that if a car is insured for all company drivers and is generally available to anyone who needs to drive it, it must be a pool car and therefore not taxable as a benefit in kind on anyone. This is, unfortunately, often not true. To be exempt from tax as a benefit in kind the car must be:
• Actually used by more than one employee or director.
• Not mainly used by one employee or director to the exclusion of all others.
• Not normally kept overnight at or near the home of a director or employee (unless the home in question happens to be close to business premises where the car is garaged/kept).
• Not used by anyone for private travel. Note that private travel includes home to work travel (except for private use which is “incidental” to business use, such as taking a car home overnight in readiness for a business trip starting very early the next day).
The onus is on the business/employer to prove that these criteria have been met, and are notoriously strictly applied. I usually recommend to clients that a very clear log of journeys made by the car (including who was using the car) is kept to support a claim that any vehicle is a pool car. 
 
Q: The other thing is that my personal car is leased by the company (we got a much better deal on the finance that way), but I reimburse the company personally for all the lease costs. The HMRC inspector says that it is still a benefit and is going back years to assess tax. This can’t be right can it?
 
A: You are right that it is rational and logical to assume that if your business leases a car for your use and you reimburse every penny of the leasing cost you would have no taxable benefit. Unfortunately, although many people can be forgiven for thinking like you, the tax rules don’t agree!
HMRC have a number of tax cases to help them and again apply the rules very strictly. The benefit in kind is calculated in the normal way: 
List price of the car x % based on the C02 emissions of the car.
You should try to argue that the benefit should be reduced by the amount you reimburse ( although even this can’t be taken for granted).
Unfortunately in these days of very high taxation of company cars the benefit in kind charge for the car is likely to exceed the lease charge you have been reimbursing.