Cars Being made Unavailable for Furloughed Staff

Background

Some companies may be considering withdrawing company cars from employees (as was seen during lockdown) - this would save the employee personal tax, and would also reduce the company's Class 1A NIC.

Withdrawing a car and then re-assigning it after any furlough period would trigger P46(car) submissions which would result in a tax code change on each submission. Setting 'unavailable' (which must be greater than 30 days) will not generate a P46(car) event, meaning a tax code change will occur only after the submission of next year's P11D.

Unavailability of a car

HMRC has offered some clarification on benefit-in-kind (BIK) tax rules as fleets come to terms with life since lockdown, where they have stated that company cars will not be seen as available for benefit in kind tax purposes, where they are ‘virtually’ handed back by returning keys and fobs.

For example, the spokesman said: "A car kept on an employee’s driveway during a period of furlough would still be considered to be made available and HMRC would not accept a SORN declaration as proof of unavailability. Ordinarily, we would expect that the car is handed back to the employer so that it cannot be used, however, we recognise that under the current circumstances it may not be possible to hand the car itself back, so we would accept that where all the keys (or tabs) are in possession of the employer, and the employee does not have the authority to request the keys are returned to them, then the car would be unavailable."

Private Fuel Benefit

Even if a car is not withdrawn the private fuel benefit can be - this does not need a physical return of the fuel card, but it will probably need a change of policy and employee agreement.

For clarity, in terms of company car tax, HMRC stated that the benefit charge applies where a car is made available for private use, whether or not it is so used.

*** Please note: As usual with matters such as this, we would recommend that customer makes direct contact with HMRC to clarify the position.