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Newsletter - Summer 2011

Not a pool car

There have been several recent Tribunal cases which illustrate the dangers of the tax rules on what are generally known as pool cars. Pool cars are tax efficient as there is no taxable benefit. However, as always, there is no such thing as a free lunch.

The conditions for a car to be regarded as a pool car and so tax free are:

the car was made available to, and actually used by, more than one employee
the car was made available, in the case of each of those employees, by reason of the employee's employment
the car was not ordinarily used by one of those employees to the exclusion of the others
in the case of each of those employees, any private use of the car made by the employee was merely incidental to the employee's other use of the car in that year and
the car was not normally kept overnight on or in the vicinity of any residential premises where any of the employees was residing, except whilst being kept overnight on premises occupied by the person making the car available to them.

In the first case, HMRC carried out an Employer Compliance Review and found that the company had provided the taxpayer with vehicles for several years. The taxpayer claimed that the vehicles were pool cars but no one else was available to use them as staff that needed cars for official use had other pool cars available.

The Tribunal found that the vehicles were not pool cars and that:

‘…the Appellant's lack of fiscal knowledge had caused him to fall foul of (the rules) which in his case became penal causing him to become liable to a car benefit charge based on the £51,000 list price of the cars which amounted to £9,156 per year. The independent dealer value of the cars having regard to their age was some £6,000 for each car meaning that the Appellant could have bought the cars for less than the tax arising on the car and fuel benefit.’

In the second case, a Mercedes Benz CD320CDI, owned by the company of which the taxpayer was a shareholder and director was claimed a pool car.

The taxpayer stated that the Mercedes was kept in a steel container at the factory and that it was never taken home. It was also only used to visit customers. However, there appeared to be no mileage log. The Tribunal found that the taxpayer failed to provide satisfactory evidence to show that all five conditions were met.

The message is clear – the key to tax free success is to ensure all conditions are considered and in particular, proper records maintained. Please do get in touch if you would like to discuss this area further.

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