Interesting HMRC Tax Claims: Is Your Company Vehicle Truly "Available”?

January 31, 2024

PAYE Compliance Check Dilemma

In the aftermath of a routine PAYE compliance check, a property maintenance business owner finds himself facing demands from HMRC for back taxes, National Insurance, and penalties. The trigger? Occasional van usage by an employee.

Tax Inspector's Controversial Stance

HMRC insists that the van is a taxable benefit in kind for the employee, even though it is utilised solely for work-related purposes. This raises questions about the universal application of rules, potentially affecting every employee with access to a company vehicle.

Deciphering the Legislation

While legislation assumes the private availability of an employer's vehicle, there's a crucial exemption. The vehicle is not deemed available for private use if the employer notifies the employee otherwise. HMRC's internal guidance emphasises the importance of such notifications.

Awareness and Tax Liability

HMRC suggests that for a vehicle to be taxable, the employee must be aware of the permission to use it. In this case, the employee is aware, but tax can be avoided if the employer explicitly prohibits private use and the employee adheres to this restriction.

Prohibition Documentation Dilemma

The tax inspector contends that lacking a written prohibition, the van remains a taxable benefit. However, the absence of a written document doesn't negate the practical prohibition instituted by the business owner, communicated verbally and reinforced by the physical control of van keys.

Practical Prohibition Factors

Exploring the practical aspects of prohibition, the business owner's verbal instructions and the secure control of van keys demonstrate a clear prohibition of private use. These factors, aligned with HMRC's internal guidance, form a strong rebuttal against the tax inspector's claims.

In summary, understanding the nuances of HMRC regulations, emphasising practical prohibitions, and aligning with internal guidance can be pivotal in challenging unjust tax claims related to company vehicles. Stay informed, stay compliant.

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