Relaxation in company car tax rules

With all but essential travel now banned, car journeys have become a rarity. Consequently, dealers have been telling us that employees are trying to hand their cars back to avoid incurring a benefit in kind.

Due to social distancing measures, employers are reluctant for these vehicles to be physically returned and have so refused. The good news is that HMRC have relaxed the rules so that as long as the keys are returned to the employer they will accept that the vehicle is no longer available for private use. All the other normal company car tax rules still apply however so the vehicle must be unavailable for a period of 30 consecutive days in order for the benefit to be reduced.

The situation with fuel is more complicated. The benefit can be apportioned for any periods when the company car is unavailable but you cannot remove private fuel entitlement in isolation and then reinstate it. This would still put the employee in fuel benefit for the entire year. To get around this, the employee would have to have no entitlement to fuel from 6 April and then have it provided to them later in the year.

Don’t forget that changes in entitlement to a benefit in kind is a change to the employee’s remuneration package and will be an amendment to their contract of employment  This change should be adequately documented but may be worthwhile to reduce tax charges for both the employee and employer.

If you have additional questions which have not been addressed above please contact Chris Cummings on 07896 117908 or by email chris.cummings@ase-global.com