Company car - director
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Poodle
Registered Posts: 711 Epic contributor 🐘
Hi
The situation - close company, one director and several other unconnected employees.
There is a very expensive car (Range Rover vogue)that the director uses all of the time for private and business use. The car is not owned by the company but is paid for through an operating lease and so this should be a reportable BIK on the Director. I presume I am correct that it should be reported even though the Director, up until now, is not on the payroll and has not drawn a salary, if the BIK is absorbed in his PA then the Company would still have Class 1a to pay?
However, this is a new client to me and the previous 'CA'
has not reported this BIK for the last two years. I am unclear as to the fuel provision on this at this stage, but I can guess it goes through the company.
Any good suggestions as to how I could proceed with this and keep the client? Bearing in mind that I may have to make a SOCA report if the client will not declare for the previous years?
Oh, and one of my other loves, he has been using the company 'credit card' for private as well as company purchases again nothing having been reported
The situation - close company, one director and several other unconnected employees.
There is a very expensive car (Range Rover vogue)that the director uses all of the time for private and business use. The car is not owned by the company but is paid for through an operating lease and so this should be a reportable BIK on the Director. I presume I am correct that it should be reported even though the Director, up until now, is not on the payroll and has not drawn a salary, if the BIK is absorbed in his PA then the Company would still have Class 1a to pay?
However, this is a new client to me and the previous 'CA'
has not reported this BIK for the last two years. I am unclear as to the fuel provision on this at this stage, but I can guess it goes through the company.Any good suggestions as to how I could proceed with this and keep the client? Bearing in mind that I may have to make a SOCA report if the client will not declare for the previous years?
Oh, and one of my other loves, he has been using the company 'credit card' for private as well as company purchases again nothing having been reported
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Comments
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All benefits made available to a director must be reported on P11D.
So, yes, there is a BIK that needs to be reported.
Yes, the company still owes Class 1A.
I would report it for the year you have been asked to prepare. Advise him that previous years should have been done and refer him back to his old accountant. At this point no MLR offence has been committed. Only if he says to you "I'm not doing that" does it need reporting, IMO. IF he says ok I will talk to him, then you have no reasonable suspicion that he plans to ignore it.
If he doesn't like it, tough. It's not your fault, you don't make the rules. If you lose the client then any accountant who wants to prepare P11D properly for him won't get the business either, i.e. only a dodgy accountant will get the business. So if you lose him don't feel bad.
That said, he might just not know and if you say, look, this needs to be done he might be fine with it and surprised that the old accountant didn't mention it. You never know until you tell him!
Re credit card, if the personal transactions go against his DLA and the DLA isn't overdrawn I don't see a P11D liability. If they go in the company P&L then yes there's a BIK.
Hope that helps!0 -
Have you considered that the private CC payments and Vogue lease may have been treated as directors loan items in past and therefore not a P11D issue?0
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Hi
Thanks for your answers.
I am still waiting for the old accountant to send me his response letter, it's been three weeks now
The lease I know is in the companies name and 50% of the VAT has been claimed in the past on the monthly payment and so to claim this against the DLA may be problematic. At this stage I do not know the state of the DLA
It looks as though lots of things are going on here and you are right M the Director may not be aware of the consequences of his actions.0 -
going forwards, it might be more tax efficient for him to pay the lease and fuel personally and charge 40p/ mile (if indeed that's feasible with the lease being in the company name)
Though, if he has no other income, it might use up his PA nicely... trouble with company cars ,you never know til you've done the maths!0 -
I thought the "alleged" confusion over operating leases was sorted out years ago, but it seems some still believe that if th ecar is funded by lease then it isn't a BIK, oh dear!
I went to a HMRC session some years ago and loved the comment the speaker made, apparently even if the employer steals the car and lets the director use it, it is still a BIK for P11D purposes. Nice that some of them have a sense of humour but boy did it get the message across.
I would say that even if the old CA has dealt with the tax and done it through the DLA it still has to go on P11D. The entries are relevant and any value already taxed or contibutions made are brought into the calculation via the working sheet (WS2). I have doubts this has happened though.
No doubt about it being an employer provided car, the 50% VAT reclaim means he is fully aware of the rules.
I agree with the others, your real problem is getting the director to accept this and to deal with the failure to declare it in previous tax years. Presumably you are taking the client on at the same time as trying to sort out the previous tax year.
I am not sure it is a SOCA reportable matter though, sounds overkill to me, and I would deal with it by confirming, in writing that the car ought to have been reported and that you will be happy to deal with the matter and negotiate a suitable settlement but that such matters are not included in the general fee. Personally I would place a call to the helpline and see what they say, but generally the answer you get is to submit a report, just to be on the safe side.
Not sure I agree with this, but!
I think an innocent chat is needed, nice latte, sit down and, oh, I've noticed this, want me to deal with it? His very immediate rection will tell you all you need to know.
Payrollpro0 -
The lack of reporting the BIK on the P11d does need sorting. I do not think at this stage a MLR report is required. You do not know the intentions of the director. As Ian has said put it to him in a friendly chat and see what his reaction is.
I had a similar case recently where a rogue CA badly advised a client. Showed the directors had a salary of £115,000 but did not do a P35. A file note says it really is a dividend. In which case there is undeclared CT of approx £25k plus undeclared tax for the directors close to £5k. Plus there are two further years of accounts not done.
AAT helpline advised no report required unless there is intention from the client. I was told to inform the client of the situation and that it needs reporting. If they chose not to then there is intention and therefore report and disengage.Regards,
Burg0 -
Dear all,
Thankyou for your replies, PRP I was aware that even with the company taking out the lease a car is a BIK and it was support and ideas on how to deal with this that I was after, and everyone, has been really helpful with this.
I am now aware that the DLA is actually overdrawn by a sizeable amount and that the D uses the company credit card each month to pay for all fuel and for all of his personal shopping, tesco, asda, itunes etc, loads of small entries!! so I also have an income, class 1 NI issue here to deal with as well.
I am seriously thinking that I may well not take on this client and redirect him back to his provious accountant!0 -
Agree, an honest mistake doesn't need reporting, it's if they refuse to correct it that tax evasion takes place and therefore triggers the need for a SAR.I had a similar case recently where a rogue CA badly advised a client. Showed the directors had a salary of £115,000 but did not do a P35. A file note says it really is a dividend. In which case there is undeclared CT of approx £25k plus undeclared tax for the directors close to £5k. Plus there are two further years of accounts not done.
OMG!!!!
Thats..... quite an oversight!!!
AAT helpline advised no report required unless there is intention from the client. I was told to inform the client of the situation and that it needs reporting. If they chose not to then there is intention and therefore report and disengage.I am seriously thinking that I may well not take on this client and redirect him back to his provious accountant!
If he will pay well, on time and can be trained then he might be worth taking on. If he isn't going to be these things, then I would get out asap ;-)0 -
Sounds like Monsoon has got it. Personally I would list all this, itemise the implications of each and the correct process to follow now if he wants it right. Again the immediate reaction will tell you whether to go on with him as a client or to decline to act.
Lets face it, if he puts up resistance to you correcting all of this then the rules demand that you refuse it.
Payrollpro0 -
Will keep you posted0
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