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One of the Readers' Forum questions in Taxation, 12 July 2007 (see Related Links above) highlights a lacuna in the company car legislation which HMRC ought to take steps to deal with.
The question posited a surveyor who was provided with a car to travel to and from sites, but who uses his own vehicle to travel to the company's premises. The questioner was concerned that the car was not a pool car and both responses that were printed addressed that issue.
However, I think that was the wrong question. The real question is whether the car is available for the employee's private use. If it is not, no benefit can arise (ITEPA 2003, s 114(1)(c)). It is not available for his private use if the terms on which it is made available prohibit such use and it is not so used (s 118(1)). Private use is defined as any use other than use for the employee's business travel (s 118(2)).
The employer in the query had already prohibited any private use of the car. The issue is therefore merely whether the car is factually used other than for business travel. Business travel is defined as travel the expenses of which (had they been paid personally by the employee) are deductible under ITEPA 2003, ss 337-342 or certain other provisions (ITEPA 2003, s 171(1)).
Deductibility
Section 338 allows a deduction for travel expenses if the employee is obliged to incur and pay them as holder of the employment (which s 171 appears to presume to be the case), they are attributable to the employee's necessary attendance at any place in the performance of his duties, and they are not expenses of ordinary commuting. As the various sites are not permanent workplaces of the employee, the travel to such sites is not ordinary commuting.
I will assume that the employee never uses the car when he is not going on a site visit.
If a site visit always lasts an entire day, no benefit-in-kind can arise. This is because the expenses of getting both to and from the site are attributable to the employee's necessary attendance at the site in the performance of the duties of the employment and the travel is not ordinary commuting because the site is not a permanent workplace.
The difficulty arises if the employee does not spend the whole day at the site. Suppose that he goes to site A in the morning and then drives to site B in the afternoon and finally goes home. The exemption still applies, as driving to site A and from site A to site B are attributable to the employee's attendance at site A, and the costs of driving from site A to site B and driving home from site B are attributable to the employee's attendance at site B.
However, what is much more likely to happen is that the employee drives to site A in the morning and then drives from site A to his office. No problem, the expenses are still attributable to the employee's necessary attendance at site A. The snag is that the car is now at his office. This creates a dilemma. He could unload all of his surveying equipment, leave the car parked at or near the office until he needs to go on another site visit and take a taxi home. When he has the next site visit, he can drive into the office in his own car, load up the company car with equipment and drive it to the site.
However, that is clearly a daft thing to do from a commercial point of view. It wastes time loading and unloading the car (it is undoubtedly necessary to do this because it is unsafe to leave valuable equipment in a parked car that would definitely be left parked overnight and could be left parked for several days). It also means wasting time driving into the office on the next site visit rather than being able to drive from the employee's home straight to the site.
Drive straight home
The commercially sensible alternative is for the surveyor to simply drive the car home from his office on the day that he visits site A. If he does that, the expenses of driving the car home are still attributable to the employee's necessary attendance at site A in the performance of his duties as, had he not gone to site A, he would not have used the car at all. Sadly, however, the journey home is 'ordinary commuting' which takes the expense outside the protection of s 338(1).
This means that if the surveyor has a short site visit after which he goes to his office on a single day during the tax year, that single journey home will mean that the car is available throughout the entire tax year for his private use and a car use benefit charge will arise. It is impossible to avoid this benefit charge even if the employee reimburses to the company the full cost of that single journey home, because doing so does not mean that the car ceases to be used for travel which is not business travel; the purpose of the travel is independent of whether or not payment is made for it.
I would hope that if the employee drives home via his office only one time during the year, HMRC would regard that journey as de minimis and ignore it. However, the probability is that the surveyor will have a number of site visits which do not last an entire day and following which he returns to his office. I doubt that HMRC could legitimately regard 20 or 30 journeys home as de minimis.
Detour alternative
Accordingly, unless the employee is prepared to accept a tax charge which is clearly wholly unreasonable in circumstances where he uses the car only when he needs to make a site visit, he will either have to adopt the highly inefficient solution of leaving the car at the office and taking public transport or a taxi home or, on the evening before he intends to make a site visit, he will have to take home with him sufficient other work that he can make the site visit, drive back home and work at home in the afternoon. If he does this, the drive home magically becomes deductible.
Consequently, it seems to me that with some forethought and a degree of inconvenience, the employee can avoid a benefit charge in such circumstances. That is good news because it is difficult to believe that Parliament could have intended a benefit to arise in circumstances where the car would not have been used at all but for the need to visit the site and the natural thing would have been to come into the office after the site visit.
It seems a bit tough that the unrepresented business, which cannot afford to buy advice, is unlikely to be able to work out the above solution and will therefore undoubtedly have to incur the unfair benefit-in-kind charge. It is probably too much to expect to have a fair tax system. Is it unrealistic, though, to hope that where an unfairness impacts solely on the self-advised, a Labour Government might be prepared to do something about it?
