Company cars are still a common benefit amongst the UK workforce, but what is the position for the Benefit in Kind on a company car whilst the employee is working from home or has been furloughed?

The benefit in Kind (BIK) on a company car can be a very costly tax deduction and many furloughed employees may not have appreciated the full impact on the amount of net pay they will receive. They will still pay the full benefit in kind tax cost although this might be at a lower marginal tax rate depending on their circumstances.

The rules relating to a company car is that if the car is available for private use then it does not matter whether the employee uses the car or not a full benefit in kind applies.

If the car is temporarily unavailable for 30 days or more then the benefit in kind will be reduced. However, if the car is sat on the driveway of the employee then we would expect HMRC to rightly argue that it is still available for private use and the BIK applies. The car would need to be left at the business premises and not be available for the employee to use for at least 30 days.  There would be a knock on effect of saved Class 1A National Insurance for the employer.

The idea of giving up the company car for an extended period won’t suit all employees but in a multi-car household it may do.

Given the 3 week lockdown and the likelihood of an extension being quite high, companies may wish to engage with their employees to highlight the issue.

Contact Craig Simpson or Richard Coombs for more information.

More information on tax position when working from home from Bates Weston and the government.