October 30th, 2012 / Insight posted in

Get your records staight or pay the price

For some time now, HM Revenue & Customs (HMRC) have had the benefit in kind for the use of company vehicles by employees at dealerships in their sights. With the need to reduce the government’s deficit, HMRC are likely to step up their efforts to maximise the tax take in this area.

Keeping track of the frequent changes in stock and demonstrator cars used by staff due to availability and mileage is often an administrative nightmare. So, in April 2009, HMRC introduced a new scheme to ‘simplify’ the calculation of the benefit in kind but, as with any simplification, there are traps for the unprepared.

Under the new scheme, any pre-existing arrangements agreed with HMRC no longer apply and staff members are allocated to a band of vehicles (calculated by value) that they are expected to stick to. A dealership now has to maintain records to demonstrate that employees have only used vehicles within their designated band. Furthermore, it will also have to account for the mileage on stock and demonstrators, as HMRC will want to cross check them against the employee records.

The provision of fuel benefit is another fertile area for HMRC, and dealerships will also need to be able to demonstrate that employees have not received free fuel, where relevant.

The costs to a dealership of HMRC finding shortfalls in their records not only include extra PAY and NI liabilities, but can also be multiplied by penalities and interest.

Our dedicated automotive team can offer practical advice on how to ensure your dealership gets its records straight and doesn’t end up paying the price!

To discuss this in further detail, or any other business related issue please contact the Lead Partner for Automotive, Janice Riches.