The First-tier Tribunal decision in the case of Ahmed Brothers  UKFTT 545 (TC), published on 16 September 2012, serves as a useful reminder of the ‘car pooling’ provisions of s 167 ITEPA 2003 and the limited circumstances in which a ‘benefit in kind’ can be avoided when a car is made available to employees.
Broadly speaking, use of a pooled company car or van is tax-free where:
- The vehicle is made available to and used by more than one employee by reason of employment ;
- The vehicle is not used by one employee to the exclusion of others;
- Any private use is incidental; and
- The vehicle is not normally kept overnight at any of the employees’ homes unless it is kept on the premises of the provider of the vehicle.
In the Ahmed case, a retail partnership made a car available for two of its employees – Mr and Mrs Abdullah – who were also the daughter and son-in-law of one of the partners. Mr and Mrs Abdullah used the car for commuting purposes totalling about 1,000 miles annually. The car was kept overnight at their home for security purposes; however, other family members working for the business also used the car.
HMRC issued an assessment contending that the car was not a pool car and the partnership appealed.
The First-tier Tribunal rejected the appeal ruling that the car was not a pool car because:
- 1,000 miles per annum amounted to more than incidental use; and
- The car was kept overnight at Mr and Mrs Abdullah’s home.
What does this mean?
Although the facts of the case are not controversial, this case serves as a useful reminder of the rules. Where a business owns a car, practitioners should identify who uses that car and where it is kept overnight. Where the above criteria are met it may be possible to escape a charge under the benefit in kind provisions.
For more information in relation to the carpool rules please contact the TaxDesk on 0845 4900 509 and ask for Priya Dutta.