Company cars and directors’ taxable benefit

Car Photograph

In the case of Frank Hudson Transport Ltd V HM Revenue & Customs, the tax authority argued successfully that where a company actually pays the finance costs of purchasing a car, there can be a taxable benefit on the director who drives it, even if these costs are actually charged against the individual director’s personal loan account balance with the company.

Wherever the company in question bought a new car, any finance contracts were arranged in the name of the company, with the directors repaying these amounts via their directors’ loan accounts. The first tier tribunal took the view that the taxpayer did, in fact receive a taxable benefit from this arrangement. It ruled that the finance agreements in the company’s name resulted in a smaller overall cost to the company, and hence, the employee.

This is an interesting development. When quantifying the taxable benefit, the established principle of of ‘ costs to the provider’ seems to have been extended here to include a hypothetical cost, which was never actually incurred by anyone.

The above title and following excerpt are found on page 46 in the ‘Briefings’ section under Taxes in the January 2011 publication of the Chartered Secretary magazine. Over to you East African revenue collection Authorities.


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