Ashley, thank you for your patience.
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.
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.
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.
It would appear the car was yours and you claimed mileage for business use. This is no way benefit in kind.
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?
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
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.