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When is a company car not a taxable perk?

Where your company owns a car which you use for business, HMRC will usually treat it as a taxable perk, even if you don’t use it for private journeys. Avoiding the tax charge isn’t straightforward. What steps do you need to take?
The way to avoid this tax charge is to prevent it from being available for private use. The legislation explains how this can be done. It says that a car will not count as available where:
  • the terms on which it is made available prohibit such use; and
  • it is not so used.

In other words, your company must tell you that the car is not to be used for private journeys and, of course, you must not actually use it as such.

While it’s easy to meet the private use prohibition requirement, the actual use condition is trickier. So how do you prove a car hasn’t been used for private journeys?

Make sure a log of all mileage travelled in the car is kept. We think that the best method of doing this is to keep a manual diary of use in the vehicle. The driver should record the date and purpose of the journey plus the odometer reading at the start and end. Given that sort of evidence HMRC has no chance of successfully arguing that a car benefit in kind charge is due.


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