Many employers will be familiar with a P11D form and company cars.
P11D forms are submitted if you need to report end-of-year expenses and benefits for your employees and directors.
Some examples of employers who will need to submit a P11D are:
- Directors who have a company car.
- Employers whose staff members have been given company cars.
- Employers whose staff members have been given medical insurance, or professional fees paid for.
Now people are asking a very important question about company cars:
What if the director or staff member has been given a company car, but has also been placed onto furlough?
How will this impact the P11D form as a taxable benefit?
Furloughed Employees And Company Cars
HMRC have announced that if an employee has a company car, and was placed onto furlough, then you should treat the car as being made available for ‘private use’ during the furlough period.
The company car will still be classed as a taxable benefit whether you are on furlough or not. There is not really any getting around this…
The car will need to be made available for private use:
- Even if you’ve instructed the employee to not use the car.
- Even if you’ve asked them for photographic proof of mileage for before and after their time on furlough.
- Even if circumstances meant that the car could not have been returned, or collected from the employee.
There is only one instance that a company car can be made ‘unavailable’ and significantly reduce the taxable benefits: Restriction of Movement.
Restriction Of Movement & Company Cars
HMRC have said that a company car can be made ‘unavailable’ during a period of time where coronavirus has caused restriction of movement.
The rules would have to forbid someone from travelling for work purposes, as they have been ordered to stay at home.
However, it’s not that simple. Even if there is restriction of movement, HMRC will only accept that a company car is unavailable if an employee has handed back the car keys.
Handing Back The Car Keys
This is the strict criteria that HMRC will need to see in order to class the company car as ‘unavailable’:
- If the company car contract is terminated and the keys have been returned (to the employer or third party).
- where the contract isn’t terminated – but 30 consecutive days have passed since the keys were returned (to the employer or third party).
It’s important to familiarise yourself with this guidance, as taxable benefits can be significantly reduced.
In short – an employee must not access to the keys of the company car for it to be classed as ‘unavailable’.
If the travel restrictions are relaxed, HMRC understand that there may be a lengthy process involved for an employer to get the car keys back to the employee in a safe way.
Therefore they will continue to class the car as ‘unavailable’ for whatever length of time the car keys are with the employer and not the employee – even after the restriction of movement has passed.
If this condition is met, then HMRC will regard the car as being ‘unavailable’ and the taxable benefits can be significantly reduced.
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