Mark McLaughlin points out that determining whether a company car is unavailable for private use is perhaps not as straightforward as it should be.
The income tax charge for an employee on the benefit-in-kind of a car provided by the employer (referred to here as a ‘company’ car for convenience) can be potentially expensive. The benefit-in-kind calculation is beyond the scope of this article but is broadly based on the car’s list price and carbon dioxide emissions.
What does ‘available’ mean?
The car benefit legislation applies if the car is made available to an employee (or member of the employee’s family or household), is made available by reason of the employment, and is available for the employee’s (or member’s) private use (ITEPA 2003, s 114(1)).
Note that a key condition for a company car benefit-in-kind charge is that the car is available for the private use of the employee (or a member of the employee’s family or household). But what does ‘available’ mean? It is not defined in the legislation. HM Revenue and Customs (HMRC) guidance (in its Employment Income MI at EIM23300) states that the “ordinary dictionary meaning” is applied, being “at one’s disposal or capable of being used”.
Furthermore, car benefit can only apply when the car is ‘made available’. HMRC considers (at EIM23200) this requires:
- a decision by someone (normally the employer) having control of the car; and
-
that decision is conveyed to the employee.
Unavailable?
Circumstances, where HMRC accepts that a car is unavailable to an employee, include:
- the car is physically incapable of being used (e.g., it has broken down and has not been repaired or is in the garage undergoing repairs); and
-
the employee is unable to gain access to the car because they do not have the car keys, or power or authority to direct the person who has the keys to hand them over or direct the person who has the keys to drive the employee to a location of the employee’s choice.
If the car was available both before and after the period in question, it must last at least 30 consecutive days to count as a period of unavailability (ITEPA 2003, s 143(2)).
A car does not count as unavailable simply because (say) the employee was banned from driving or the car does not meet normal legal requirements.
For example, in Norton & Anor v Revenue and Customs [2023] UKUT 48 (TCC), the appellant car dealership bought an expensive and rare Maserati and a rare high-performance Ford GT40. In 2016, HMRC considered that those cars had been made available to the first appellant (TN) as a benefit-in-kind. On appeal, the Upper Tribunal (UT) noted the company’s handbook provided that a company vehicle may not be used without the express permission of management and that any vehicle used must have road tax (or trade plates). The UT held that this prohibition was conditional; as with the legal obstacle to driving an untaxed car, it was not an effective restraint upon use where TN could comply with the company’s handbook by arranging for prior payment of road tax. The appellants’ appeals were dismissed (apart from one discovery assessment).
Practical tip
HMRC guidance (at EIM25175) confirms that a car does not count as unavailable simply because there is no road tax (or MOT certificate, or insurance); the car must be withdrawn so that the employee cannot access it.
