Taxing times: Government benefit-in-kind coronavirus guidance
HMRC has issued guidance to companies on the tax treatment of company and private vehicles, and transport costs, during the Covid-19 pandemic. You can find the full breakdown of advice here.
Company car tax guidance
Employees, even if they are not using their company car because they have been furloughed or are working from home, are still liable to pay benefit-in-kind tax. Employers should advise staff that their vehicle is ‘available for private use’ during the lockdown period – as such it remains a benefit-in-kind.
There are a few exceptions which apply to a vehicle either coming to the end of its fleet life, or where an employee is leaving the business. If a vehicle has come to the end of its contract but cannot be returned because of restrictions on movement due to coronavirus (i.e. the employee cannot leave home or there is no driver to take the vehicle away), HMRC will treat the vehicle as being unavailable for use from the date of the contract termination as long as the keys are returned to the employer/lease company.
Separately, if a vehicle is still in contract but the car cannot be returned by the employee (for example if they are leaving the business or have been made redundant), HMRC will accept it is unavailable after 30 consecutive days from when the keys are returned to the employer/lease company.
Some ‘fake news’ suggested employees can simply post their keys back to their employer as a way to avoid paying company car tax – this is not true.
Salary sacrifice guidance
Normally, salary sacrifice arrangements cannot be altered, except in the case of significant ‘life events’. HMRC has accepted that the Covid-19 pandemic is a ‘life event’, and therefore an employee now has the option to amend a salary sacrifice arrangement relating to the funding of a vehicle.
If they do so, the employer must amend the employee’s contract of employment.
Transport expenses guidance
Employees who are using their company vehicle to do voluntary work can be paid the appropriate Advisory Fuel Rate (AFR). It is worth noting that these payments are optional. Here you can check AFR rates.
Employees using their own cars to volunteer can be refunded (again, optionally) for travel costs through the Approved Mileage Allowance rate.
Commuting costs guidance
HMRC has announced some tax exemptions concerning the refund of employee commuting costs due to the impact of coronavirus. To gain exemption from benefit-in-kind tax, the following four conditions must be met:
- the employee has to work later than usual, and until at least 9pm
- this happens irregularly
- by the time the employee finishes work, either public transport has stopped or it would not be reasonable to expect them to use public transport
- the transport is by taxi or similar road transport.
Car-sharing arrangements have also been considered. As regular car-sharing groups are advised not to operate due to social distancing measures, those employees not able to share the car can be exempt from tax on the refund of commuting costs.
The total number of exempt journeys cannot exceed 60 journeys in a tax year. This is a single limit that applies to the late-night journeys and the failure of any car-sharing arrangement, together. For further travel advice, visit this link.