I am currently on a car scheme whereby my employer contributes to the cost based on my business miles. I then pay the remainder and claim business miles back at a low rate (i.e. 12-15 pence per mile). I pay tax as a benefit-in-kind (BIK) on this, which I don't dispute. The new scheme, which I'm looking at for when this lease ends in February next year, is based around work not paying any contribution towards the lease, but allowing me to claim business miles back at a rate of 64 pence per mile, which is the same amount as private car owners. I will cover the lease cost each month, taken directly from salary. My question is: am I going to have to pay tax as a BIK? I've worked out a number of scenarios but am unsure from HRMC’s perspective if it will be classed as a BIK. One of the scenarios is that my monthly payments will add up to more than the cash equivalent value. But then I've read on some guidance that 'lease payments are not considered'.
Arthur Weller replies:
It appears that you will cover the lease payments entirely yourself, and so this is a case of an employee using his own vehicle for work. See HMRC’s Employment Income manual at EIM31200 for the rules. If your employer is paying you 64 pence per mile this is 19 pence per mile more than 45 pence per mile, and is taxable as a BIK. See HMRC’s Employment Income manual at EIM31355, Example 2. However, it could be that I have misconstrued the facts of your case.