Benefit in Kind on Purchasing Car Via Company

Q. I am a shareholder in a family-run trading company. Last year I purchased a hybrid car via the company. The relevant BIK percentage is 14%. With the recent increase in fuel prices, I am considering having the company purchase the fuel for the car and reimburse it for the private fuel without incurring a benefit in kind? Currently, I don’t claim anything as business journeys tend to be covered by the battery range.

 

A: In theory yes, but if you don’t reimburse every last penny you will incur a taxable benefit of 14% x £25,300 = £3,542. You will pay tax on this, and the company will have to pay Class 1A NI. You would have to keep meticulous records to precisely determine your private mileage. This may be difficult to do in practice.

Instead, consider having the company pay you at the approved mileage rates for your business mileage. As your car isn’t fully electric, you will be able to claim at the appropriate rate for petrol or diesel cars accordingly, and as you say the business mileage is generally covered by the electric range, this would be very efficient. The latest rates are available here and are updated quarterly.

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