As small business owners – or even employees – we all want to save a few bob on our tax bill. With the rise of the company car, so accompanied the creation of (and subsequent rises in) tax for the use thereof. What was once a blessing, a benefit of kind, has since become a benefit in kind. As such, the tax man takes his cut of that perceived benefit.
What doesn’t help proving or disproving an individual’s liability is the letter of the law. When HMRC class even the commute to work in a fleet vehicle as a benefit, there’s little defence an employee can give for not paying their dues.
For van drivers, the legislation is different. Using their van to get to site the tax man classes differently from an employee making their way to work. The key difference is that the van is classed as a tool of the trade, not a benefit.
For a more in depth view of these differences, this concise overview from TomTom covers all the main points.
What’s the best way of avoiding Benefit in Kind for company cars?
The waters become muddier for employees who work for car dealerships. The employer – the dealer – often grants the employee the use of a car from the pool.
Like any business that has a pool of cars, any employee can use any vehicle. They can then use that vehicle for business or personal use.
But, as it’s not a company car in the technical sense, where does the tax liability kick in? How does the employer keep track of who’s using which vehicle for what purpose?
With a vast fleet at a manager’s disposal, the admin alone can become a full time job. Factor in the cost of any fuel for which the employee does not reimburse their employer and the cost can also become inhibitive.
DMCL’s BIK module tool: app-y days are here again
A handy tool from Dealer Car Manager can help eliminate any doubt as to who’s doing what and when in any company vehicle. It won’t necessarily eliminate tax liability, but it will help determine accurate usage.
They say that necessity is the mother of invention. And sometimes, the simplest solutions are the best. DCML’s BIK module tool is the product of that need and is simplicity itself.
Designed for car dealership employees using demonstrator models, the tool uses GPS technology. Each employee has their own id and, as they set off on a journey, they can choose to record that journey as business or personal use.
Number-crunching the data without the headache
And this is the ingenious bit – the legs paddling under the water that makes the whole thing look simple and graceful on top. In the background:
- the fleet manager can adjust the cost of the forecourt price the business pays for fuel;
- the tool calculates mileage for each employee via telematics – onboard software – or from a smartphone app;
- the software recognises the vehicle type and adjusts an individual’s liability in accordance with government vehicle bands;
- works out the Benefit in Kind liability for an individual and stores it in a verifiable format for transmission to HMRC at any given time.
But the key thing here from an employee’s perspective is not how smart or simple the app is. It’s if they pay back their employer for every mile they travel for personal use, they’re exempt from BiK tax liability. Bonus!
Of course, it’s down to the individual to repay their full mileage. Some may see it more beneficial to pay the tax on the benefit. But if you’re looking for a 100% legitimate way of avoiding Vehicle BiK, DCML’s Compliance Manager looks like it’s got mileage.