Cars not taxable benefit

The taxpayer company provided cars to its sales people and managers introducing a vehicle-leasing scheme in 2003.

It paid employees for their business mileage at the same rate as other group staff members who used their own cars for business with the amounts offset against the rent owed by the worker.

HMRC accepted that the amount paid by the employee under the lease scheme was an arm’s length commercial rental equivalent to what ought to be due if the employee hired the car direct from a third party – but the tax department considered the vehicle a taxable benefit under ITEPA 2003 s 114.

The First-tier Tribunal allowed the taxpayer’s appeal deciding that the arrangements to lease the cars to employees and pay them mileage allowances did not give rise to a liability to tax.

The tribunal also overturned the Revenue’s assessment that National Insurance was...