ACCOUNTANTS, TAX CONSULTANTS & ADVISERS TO BUSINESS

121 Trewmount road, Dungannon, BT71 7EF

Pool Car Pitfalls

Be wary of your treatment ‘pooled’ cars, clapped out bangers, and most of all be careful of clapped out bangers that you call a pooled car.

The recent tribunal case Yum Yum Ltd v HMRC (TC616) reinforces how difficult it can be to class a company-owned car as a pool car for tax purposes. The company alleged that the car (which was the only company vehicle and was kept overnight at the controlling director’s house) was a ‘pooled car’ on the grounds that company records were kept at the house and thus this was property occupied by the company.

Whilst the judge sympathised that the car benefit scale charge was completely disproportionate to the benefit actually generated by the provision of the car he ruled in favour of HMRC.

The car in question was a 1997 Jaguar XJ Sport, with a list price of £38,879 when new, a purchase price of £14,000 and present value of £250.

Three lessons:

  1. Pool car provisions are notoriously difficult to comply with and many fail to stand up to HMRC scrutiny. To stand any chance you will need good records to prove your case
  2. It is not just home to work mileage allowances etc, where an allegation of a second place of business at the director’s home is unlikely to win over HMRC, but car benefits too.
  3. Check your fixed asset register for vehicles that had a high list price when new compared to their current value. Unless there is no private use at all (which is also usually difficult to prove to HMRC’s satisfaction) then it may be worth considering transferring the car to a suitable individual so that it ceases to be an employer provided car. This can be done either at the current low value or free of charge, but in the latter there’ll be a requirement to complete a P11D and Class 1A liability. The liability will be small, however the penalties for overlooking this requirement is not.