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My client employs two salesmen who live 45 and 60 miles, respectively, from the company offices, and cover northern and eastern England. They are each provided with a company vehicle and up to 5 April had suffered car benefit. It became apparent that the two employees were based primarily at their private homes and travelled directly to their customers each day, with the exception of Friday when they would visit the offices to attend a short sales meeting and to attend to any paperwork that may have arisen.
My client employs two salesmen who live 45 and 60 miles, respectively, from the company offices, and cover northern and eastern England. They are each provided with a company vehicle and up to 5 April had suffered car benefit. It became apparent that the two employees were based primarily at their private homes and travelled directly to their customers each day, with the exception of Friday when they would visit the offices to attend a short sales meeting and to attend to any paperwork that may have arisen.
In both cases the employees had second, private cars available for their use, and could very easily avoid the use of the company vehicle for private purposes. The employer duly wrote to each salesman advising him that the company cars were no longer available for private mileage and I approached the local Revenue Compliance Officer to obtain clearance in advance of forms P46(car). The Area Compliance Manager, having referred the case to Personal Tax Division, has said that the journey to the offices each Friday constitutes private mileage and the full benefit would then apply. The way forward appears to be withdrawal of the benefits via P46(car) and then await a section 9A notice.
What are readers' thoughts on the likelihood of success or the tactics that should be used?
(Query T16,039) - RKS.
Inland Revenue booklet 490: Employee Travel contains a very useful example relevant to 'RKS's' case at paragraph 3.37. The example relates to an employee whose workplace is defined by a geographical area, but who also travels to an office regularly. In this case the travel to the office is regarded as ordinary commuting.
Paragraph 3.9 of the same booklet indicates that even if an employee only travels to the office one day per week, then the office may be regarded as a permanent workplace if the visits are regular.
In conclusion, it seems that the Area Compliance Manager is correct.
There are two ways around the problem. First, the visits to the office could become irregular and very short. This solution, however, may be difficult from a business point of view. Secondly, the employees could travel to the office in their private vehicles.
The above solutions may circumvent the ordinary commuting problem, but not necessarily the benefit in kind problem. A benefit in kind arises where a company vehicle is 'made available for private use' (see section 157, Taxes Act 1988). If the car is available for private use, then the benefit arises. Whether the car is so used or not is irrelevant. One therefore needs to ensure that the car is not available for private use. Clearly the availability of a second vehicle helps.
The writer suggests a letter to each salesperson from the company stipulating that the company vehicle is not to be used under any circumstances for private use. This will also include travel to and from the office. As an addition, the cars could possibly only be insured for business use (and not social, domestic and pleasure). Even though the premium may not reduce very much, the company could state in its letter to the employee that the employee is not insured for private travel in the vehicle. Obviously no other family members should be included on the insurance as named drivers. It would then be difficult for the Revenue to argue that the car is available for private use. - TC AT.
Paragraph 3.35 of the Inland Revenue booklet 490 Employee Travel states that an employee whose duties are defined by reference to a particular geographical area is entitled to relief for the full cost of business travel made within that area. Moreover, the occasional performance of duties outside that area will not prevent it from being a permanent workplace (see paragraph 7 of Schedule 12A to the Taxes Act 1988).
The clients of 'RKS' should clarify the purely incidental character of the functions performed on Friday. It would perhaps be surprising if no calls at all are made to customers on that day, as the distances mentioned should not be a sufficient obstacle even if the company's offices are situated outside the north east of England. Those offices need not constitute a permanent workplace because the attendance there is quite different in character from the functions performed at customers' premises, being closer to the paperwork doubtless attended to on occasion at home.
The sales meeting is something which could take place at any convenient location - in more sophisticated circles an electronic conference is possible. Paragraph 3.26 of the booklet confirms that not every place at which an employee is allocated tasks is necessarily a permanent workplace.
Standard advice is to proceed as if for a hearing, hoping that the Inspector will yield beforehand. - Elder.
Form P46(Car) does not create or withdraw a car benefit. It is used to say whether or not a car is still provided for private use. Even if 'RKS' does not think that travelling to the office is a private journey, the Compliance Officer has said that it is. Simply using form P46(Car) to withdraw the benefit is not sufficient.
What will happen if no benefit is reported is that the employer will complete an incorrect form P11D and the individuals will complete incorrect tax returns. 'RKS' will have advised them of this incorrect course of action. Conspiracy to defraud might be too strong a phrase, but we do have returns that are submitted knowing that they do not agree with the Inland Revenue's views.
The likelihood of success is that, unless full disclosure is made in the white space, the Inland Revenue could always come back at any time looking for interest, penalties and all other clients where 'RKS' has submitted or assisted in submitting incorrect returns. - JWG.
Extract from reply by 'Barham':
As the firm's office is a branch of the salesmen's employment, trips between the home office and the firm's office are inter office travel and not 'home to office'. As alleged home to office travel is an Inland Revenue sacred cow, a debate is inevitable and the point will probably have to be won before the General Commissioners.
Conveniently, the Friday trips form the only area of contention and both men have private cars available. So all they need do is to use their own cars, in place of the company ones, for the Friday trips, and the problem dissolves.
In the circumstances of their employment, it behoves the salesmen to ensure that adequate claims for necessary expenses of employment are made in respect of domestic overheads (office space), utilities and capital allowances. By their existence, the claims will emphasise that the men's homes are their employment bases.
