Company car BIK query

michaelmac

Hi
My 4 month old company car has a serious recurring problem which is a design/manufacturing defect in this new model and when it happens, basically the engine seizes and can't be driven. The up shot of it is that after a couple of failed attempts to remedy this problem by my local dealer, the car is going to be off the road until the cause of the defect can be accurately traced and rectified. The latest news on this is that the likely fix will not be available and applied to the car until the end of March 2010.

After a series of unsuitable hire cars the manufacturer has now supplied me with a long-term courtesy car which is the predecessor to my car and thus free from the engine defect. The engine is less powerful than the engine in mine and it is the basic spec model, so does not have a number of add-ons such as sat-nav, ipod and mp3 interface, cd changer, heated seats that I specified and paid extra up front for in my vehicle.

Unfortunately however, this older engine has dramatically higher emissions than the new engine, 30-40% higher, so my question is whether I will be liable for the BIK on this courtesy vehicle. I have asked our fleet manager and he has said that I shouldn't worry about it, that he's never been has this be a problem and that nobody will be the wiser but it strikes me that the manufacturer will have to account for the use of the courtesy car, so there may be a paper trail for the asset.

My other concern is that surely any tax liability, should it arise will be my problem and the reassurances of our fleet chap will be of little help. It's a bit petty but even if my BIK remains on my existing car, I'm still driving a lower speced, lower-powered model yet paying the same tax. Do I have any comeback against the manufacturer for this?

Thank you for any help or advice.

fengirl_2

Surely this is a matter between your employer and the manufacturer? If you are not happy with the car provided, surely it's up to your employer to ask for something better, or else provide something else and charge the manufacturer?
As for the tax on the BIK, its your employer's responsibility to report your car benefit to HMRC on a P11d at the end of each tax year. Although, as you say, you pay the tax and if your employer makes an incorrect return, you ultimately pay the tax.

Rolo_Tomasi

As an employee you are taxed on the availability of a company car. If a car is unavailable, the car benefit is reduced by the number of days that it is unavailable. I dont think it matters where the car comes from.

Although I have never come across anything like this before I think that the correct treatment would be for you to be taxed on each car for the time that they are made available to you. If the replacement car causes you a higher tax benefit I don't see that there is anything you can do about it except to ask your employer to send it back and ask for a more tax efficient vehicle.

Elaine_Wilson

I see the tax position as this.

Your employer has provided you with a car which is available for private use. A benefit is payable on this car.

Subsequently this car is made unavailable for private use (by being returned to the manufacturer). The original car will again be available for your use in the future.

The rules depend upon the period the replacement car is provided for. Less than thirty days then it is ignored. In your case the period is longer than thirty days so this must be recorded as a change of vehicle.

The benefit will therefore be calculated on the actual vehicle being driven and it looks like, from what you have said, you will lose out.

From the tax point of view that's just tough luck.

Looking at other aspects there is a contract between your employer and the manufacturer (possibly through a dealer). The original vehicle is obviously not fit for purpose and the employer could probably repudiate the contract. Or they could demand a replacement car of suitable quality which your present vehicle does not seem to be. Your taxable benefit is, I think, of little consequence in this aspect.

Finally, the original car was provided by the employer, presumably in accordance with your contract of employment. They are currently not abiding by that contract so you may be able to bring pressure on them to either arrange for the replacement car to be exchanged or for some form of compensation to be given to you. An amount equal to the extra tax you will have to pay would seem a suitable amount.

Off the record now, I think the fleet manager has a good point. If the company is willing to falsify the form P11D I agree the chance of being found out is minimal in these circumstances. However, it is not zero.