Tax risk for private use of pool fleets

-
Employers could be left at risk of dodging tax rules if they allow private use of pool fleet vehicles and car-sharing services.

Fleet of cars

Source: Written by Gareth Roberts for FleetNews on 26/01/2016

Benefit-in-Kind (BIK) should be paid on any company car/van if it fails to meet five conditions, says the HM Revenue and Customers (HMRC).

    • No private use
    • The vehicle must be used by more than one employee
    • Not to the exclusion of others
    • Must be made available to employees through the course of their work
    • The vehicle cannot be kept near the employee’s home at night

An HMRC spokesman said: “Employers should keep records such as mileage records, including origin and destination [and driver], in order to show that the journey was a business journey."

To be clear about the records they should keep, they should contact their HMRC customer relationship manager (if they have one), HMRC directly or a tax advisor.

Example:

An employee is required to make a long business journey. The employee is allowed to take a pooled car to their home the previous evening, to make an early morning start.

If the employee gets it wrong, HMRC can issue a fine of up to £3,000 per annum, per employee, for an incorrect tax return.

Inspectors can also determine whether the inaccuracy was careless, deliberate but not concealed, or deliberate and concealed, and will link a penalty for each offence as a percentage of ‘potential lost revenue’ – up to 30%; from 20% to 70%; and from 30% to 100% respectively.

This could involve:

    • Unpaid tax going back 4 years
    • Unpaid National Insurance going back 6 years
    • Lost interest on these sums
    • A late payment penalty

An employee would be permitted to use the vehicle privately by paying a hire charge, if they were in a car sharing scheme. However, it is important to be aware that this does not remove the BiK charge, but the hire charge can be considered a private use contribution, which can then be set against the car.

Alphabet, which launched its car sharing service Alpha City in 2012, told Fleet News it hadn’t seen any examples of fleets abusing pool car rules.

Jon Burdekin, Head of Product Management at Alphabet said that: “It’s not an issue as far as our customers are concerned, but our advice to fleets is keep a tight rein on pool cars and make sure you know the rules". Alphabet also believes the existing tax regime is able to cater for the predicted growth in pool car fleets and car sharing schemes.