Cars Benefits in Kind

groundy

I have a company that is currently going through a PAYE review. One thing that has stood out than I am struggling to check if HMRC are right.

The director pays a car lease for his daughter. Initially she was not an employee and therefore I debited his directors loan as a personal expense. She is now an employee and a P11D will be declared. However, HMRC are arguing that a P11D is required for the period she wasn't an employee as the lease agreement is in the company name. They are willing to accept the charge to directors loan as a contribution to benefit but they want to charge the fuel benefit also.

I would have thought charging to directors loan was sufficient but there argument is based on the lease being in the company name.

Any suggestions would be welcome, cheers

KernowAccountant

ITEPA 2003 s201(2) + s721(5)

They've got a pretty strong argument!

payrollpro

I would agree here, under the connected persons rules the director has a P11D for the fuel benefit even if they are not using the car simply because the driver is connected to them, it is a company car, whatever the financial arrangements are. Technically the P11D needs to be for both car and fuel to work out the tax value of them, then the charge to the DLA comes off as contribution towards the use. I suspect HMRC are taking the view that funding the leasing charges personally through the DLA is enough for them, but it isnt correct.

Wouldnt it be more cost effective to fund the lease corporately, claw back whatever VAT can be reclaimed, take the CT relief and just pay the BIK tax under P11D? To me it would be much simpler.

Payrollpro

groundy

Thanks for the replies.

payrollpro that was my thought that that we may be better amending for the CT relief but thanks for the confirmation.

This has all come about as our client prepares his own payroll and did not submit a P35 for three years. Always warned him but another one of them that only worries once it happens!!!