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HMRC’s guidance on availability of cars and vans for private use

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When is a vehicle “available” as a company car or van?

PAYE compliance check

Our subscriber runs a property maintenance business. He has two employees but otherwise uses self-employed subcontractors for most jobs.

He recently completed an HMRC PAYE compliance questionnaire in which he mentioned that his firm owns a van that’s used by the subcontractors to transport bulky materials.

It’s also used a few times a year by one of his employees for the same purpose. HMRC now insists the van is a taxable benefit in kind for the employee.

Tax inspector’s view

Even though the employee only ever uses the van for work the inspector says the rules deem it to be available to the employee for private use. If the rule applied universally it would mean that every employee whose employer owns a car or van could face a tax charge whether or not they ever use the vehicle. This would be a nonsensical outcome.

What the rules really mean

While the legislation assumes an employer’s car or van is available for private use, there’s a get-out where it isn’t actually used for private journeys and the employer notifies the employee that private use isn’t allowed. What’s more, HMRC’s internal guidance goes further.

Tip. It says that for a van or car to count as available to an employee, the employer must have notified the employee that they are allowed to use it. In other words, an employee isn’t taxable unless they are aware they can use a van or car (see The next step ).

Available but not taxable

In our subscriber’s case, his employee is aware that he can use the van, which means it’s available to him and so potentially taxable as a benefit. However, as already mentioned, tax can be avoided if our subscriber prohibits private use and the employee doesn’t use the van for such journeys.

Tip. Journeys made between home and an employee’s normal place of work count as private travel if made in a car but not when made in a van.

Has private use been prohibited?

The tax inspector accepts that the van is not used for private journeys but asserts that because the rules deem it to be available for that purpose, and as there’s no document prohibiting such use, it’s a taxable benefit.

Tip. A written prohibition, e.g. in the employee’s contract, is recommended but the absence of one doesn’t mean that private use isn’t prohibited.

Practical prohibition

Our subscriber has told those who use the van that it’s only for business use. This amounts to the same as prohibiting private use. What’s more, the keys to the van are kept by our subscriber when the van is not in use, which means the employee cannot access it without the express permission and knowledge of our subscriber. There’s little doubt that these factors would defeat the tax inspector’s misguided attempt to demand tax and he should strongly rebut the inspector’s argument and point him to HMRC’s internal guidance.

For a link to HMRC’s guidance on availability of cars and vans for private use, visit https://www.tips-and-advice.co.uk , Download Zone, year 24 issue 8.