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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4882
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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I left my job at the end of January and started new employment

Resolved Question:

I left my job at the end of January and started new employment on 2 February. My ex boss is causing me distress even though we parted on good terms. He offered me a 'loan' to buy a car over a year ago as he felt it was inappropriate for me to turn up at client meetings in my KA but didn't want it to be registered to the company. I signed a letter that stated I did not have to pay the money back in two years and if I left the employment I would either pay money or give the car back. I was told that although they were putting it through as a 'loan' I would never have to pay any money back. Well I left and gave the car back. My ex boss asked me to write him a letter stating that as the legal owner of the car he has permission to sell it from me 'the registered keeper', which I did. He has now sold the car. He bought the car for £10,000. Sold it for £7800. He has now informed me that the shortfall is a benefit in kind to me which will be submitted to HMRC on my p11d and i will be liable for tax of approx £80 per month for a year! I am at my wits end. This was NEVER agreed and I feel he is being petty because I left. On leaving he offered me to keep the car, a £10000 payrise and directorship in the company, all of which I refused. Please can you advise if I have to just lay down and accept this BIK or whether I can fight it?
Thank you so much for any help you can give.
Submitted: 2 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 2 years ago.
Hello and welcome to the site. Thank you for your question.

Please clarify for me...

Your ex-employer gave you a loan to buy a car that was registered in your name. The reason being he wished you to visit clients/customers in a better looking car (image).

Did the compnay own the car?
Did he pay for the running costs/fuel ruled to that car?
You say you left his employment in Jan. For how long did you have the benefit of that car?

Many thanks
Customer: replied 2 years ago.

Hi,

My ex-employer offered me a company car but in the guise of a company loan that I would never have to pay back because it would be better for the company. He said that I could find a car to the value of £10000 and once I found it he would pay the money directly to the seller. Which he did. He asked me to sign a letter that stated I would not have to pay any money back in two years and that if I left employment I could either pay money back or hand the car back. I agreed and signed. There were no other conditions.

He wanted me to put the car in my name and pay for running costs but claim expenses for company mileage which I did.

I had the car for a year. From January 2014 to January 2015.

When I left he asked me to send a letter stating that as he is the legal owner of the car he has the right to sell it, even though I was still the registered keeper.

If I had known this would be the outcome I would never have agreed to it. I would never ask for a company loan. They came to me and I felt that they wanted me to do it and I would have a better car to drive so was happy with the arrangement. Not once during my entire employment was BIK ever discussed or any shortfall in the car ever discussed other than for him to moan sometimes that if I gave the car back it would have depreciated so he would be losing money. I guess I should have seen a red flag there but I believed them. I was a very successful and valued employee who brought in just under half a million pounds worth of business that year. I brought in £26,000 in profit in January for which he would have paid me commision on in February but obviously as I left he saved that money. To say I feel hurt by his actions is an understatement. I feel trapped in a situation that I didnt see coming and dont know what my rights are, if any. Can it really be ok to enforce BIK on an employee who had no idea that was going to be coming?

Expert:  taxadvisor.uk replied 2 years ago.
Ashley, thank you for your comprehensive reply.

I am with a client and I will revert to you with my recommendation this afternoon.

Many thanks
Customer: replied 2 years ago.

Ok, thank you!

Expert:  taxadvisor.uk replied 2 years ago.
Ashley, thank you for your patience.

[q]

My ex-employer offered me a company car but in the guise of a company loan that I would never have to pay back because it would be better for the company. He said that I could find a car to the value of £10000 and once I found it he would pay the money directly to the seller. Which he did. He asked me to sign a letter that stated I would not have to pay any money back in two years and that if I left employment I could either pay money back or hand the car back. I agreed and signed. There were no other conditions.

[a]

Based on what you have stated, if anything, you were in receipt of a beneficial loan.

This is how beneficial loans are viewed/treated for BIK purposes (source: guide to benefits in kind from ACCA website)

A tax charge arises on the benefit of a loan. Where it is a loan with little or no interest, the benefit is charged on the difference between the interest paid in a tax year and interest payable at the official rate.

In calculating this, the standard way is to multiply the average amount outstanding at the beginning and end of the year and apply the official rate of interest. An alternative method of calculation, based on the day-to-day outstanding balance may be used at the request of either HMRC or the taxpayer.

Small loans totalling £5,000 or less, e.g. season ticket loans, can be disregarded.

For further information on beneficial loans, visit http://www.hmrc.gov.uk/paye/exb/a-z/l/loans.htm.



[q]

He wanted me to put the car in my name and pay for running costs but claim expenses for company mileage which I did.

I had the car for a year. From January 2014 to January 2015.

[a]

It would appear the car was yours and you claimed mileage for business use. This is no way benefit in kind.


[q]

When I left he asked me to send a letter stating that as he is the legal owner of the car he has the right to sell it, even though I was still the registered keeper.

If I had known this would be the outcome I would never have agreed to it. I would never ask for a company loan. They came to me and I felt that they wanted me to do it and I would have a better car to drive so was happy with the arrangement. Not once during my entire employment was BIK ever discussed or any shortfall in the car ever discussed other than for him to moan sometimes that if I gave the car back it would have depreciated so he would be losing money. I guess I should have seen a red flag there but I believed them. I was a very successful and valued employee who brought in just under half a million pounds worth of business that year. I brought in £26,000 in profit in January for which he would have paid me commision on in February but obviously as I left he saved that money. To say I feel hurt by his actions is an understatement. I feel trapped in a situation that I didnt see coming and dont know what my rights are, if any. Can it really be ok to enforce BIK on an employee who had no idea that was going to be coming?

[a]

As I see it, interest on the loan is the only benefit in kind you had. If he declares that on a P11D return then you should declare it on your tax return and pay tax on it. It would certainly not be anywhere near £80pm over a year.

More information on benefits in kind can be found here

www.accaglobal.com/content/dam/ACCA.../BHP-benefits-kind-2011.doc

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 2 years ago.

That's great and thank you for your help!

Expert:  taxadvisor.uk replied 2 years ago.
Ashley, thank you for your good words.

If you are happy and there are no more issues I will appreciate if you would kindly rate/accept the service I provided to ensure I get credited for it.

taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4882
Experience: FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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Expert:  taxadvisor.uk replied 2 years ago.
I thank you for accepting my answer.

Best wishes

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