Conditions met

Liability of employee to car benefit

The taxpayer had been employed on a fixed-term contract. She was entitled to a car allowance which could be paid in cash or as a car. She opted for the latter. The car was worth less than the allowance so the balance was paid in cash with her monthly salary.

In her tax return car benefit was included according to the amount shown on the form P11D. The taxpayer said because the employer had paid only the balance of the total allowance she had in effect paid for the car lease payments and was entitled to deduct them. She also claimed mileage allowance.

The First-tier Tribunal agreed with HMRC that the taxpayer had not contributed from her own resources towards the car. The car allowance had been a way of paying her cash or a payment in kind....