Willmott Dixon Wins Cash Allowance for Grey Fleet Claim Against HMRC

Willmott Dixon Wins Cash Allowance for Grey Fleet Claim Against HMRC

Visit our Vehicle Guide central online toolbox

Willmott Dixon Wins Cash Allowance for Grey Fleet Claim Against HMRC

FTT Decides Car Allowance Payments Were Earnings With “Relevant Motoring Expenditure”.

In what is a landmark ruling for fleets, a First Tier Tribunal has ruled in favour of Leading Construction & Property firm Wilmott Dixon over car allowance payments for “grey fleet” vehicles in which payments were made to its employees.

Initially HMRC had refused to refund Willmott Dixon for NICs paid from 2004/05 to May 2014 relating to car allowance payments made by the firm.

However, the ruling means that the payments made to its employees were ‘relevant motoring expenditure’ and therefore should qualify for relief from Class 1 National Insurance Contributions (NICs).

Payments Based on Grade

Car allowances from Willmott Dixon, which was represented by Innovation Professional Services, were paid to employees based on a grade which was allocated to that employee.

This meant that the amount paid did not depend on the number of business miles driven by an employee, but rather their grade – based on seniority.

The actual business miles driven were reimbursed to an employee in the form of a separate business mileage payment.

Where an employee from a certain grade chose to select a car from a lower grade choice list, they could be reimbursed the difference in the car allowance for those grades.

Meanwhile, some individuals who drove no business miles were awarded a grade and allowances were paid even when an employee was ill (including long-term sick) or their business miles reduced because, for example, of the pandemic.

Use of the Car Allowance

The purpose of the car allowance was to ensure that an employee had a properly insured, maintained and reliable motor vehicle available for business use – defined broadly as a vehicle which could be used for performing his or her duties as an employee.

Furthermore, an employee who received the car allowance was obliged to have a fit and proper vehicle for business use. That didn’t mean however, that the employee HAD to use the car allowance for that purpose.

Where an employee didn’t have an adequate vehicle, Willmott Dixon expected the employee to use the allowance to acquire one. However, there was no contractual or obligation otherwise to use the allowance for this.

Similarly, where an employee was already in possession of a satisfactory vehicle, then Willmott Dixon anticipated that the allowance would be paid on the financing, maintenance and costs of insurance and any other ongoing costs. But again, there was no contractual or other obligation to do so.

The employee was free to decide on what they spent the car allowance, and it could be spent on something wholly unrelated to the vehicle or its use for business travel.

The court heard that Willmott Dixon undertook a “rigorous analysis” of the underlying data and set the level of the allowances on the basis that an employee did 10,000 business miles per year.

Their analysis revealed that such an employee would be in the same financial position whether they opted for the car allowance or chose a company car.

The Verdict – Car allowance payments were “relevant motoring expenditure”.

The FTT had to first decide whether the car allowance payments were earnings for NICs purposes or reimbursements of business expenses.

Given the amount of car allowance paid did not depend on the number of business miles driven by that particular employee, the FTT decided that the car allowance payments were earnings.

The key factor though is that also decided that the earnings were “relevant motoring expenditure” – citing the Court of Appeal decision in favour of Total People (now Cheshire Employment and Skills) almost 10 years ago on a similar matter.

At the same time, the verdict also contradicted a more recent decision involving Laing O’Rourke (LOR).

Total People

Total People’s had a long-running legal battle with HMRC in relation to an NI refund.

Their claim was based on the difference between the HMRC 40p per mile (ppm) approved mileage allowance payment (AMAP) rate (now 45p) and the 12ppm paid by the employer plus an additional lump sum paid to the employees for using their private cars on business.

The value of the amount claimed by Total People was approximately £146,000 which equated to £1,000 per employee. This was subsequently paid by HMRC.

Laing O’Rourke

Laing O’Rourke lost a £2.2 million claim for relief on grey fleet business mileage payments paid to employees at its firm.

Laing O’Rourke argued that its car allowance scheme should qualify for relief from NICs on payments made to employees.

HMRC said relief did not apply because the payments could not be defined as “relevant motoring expenditure.”

Judge Tracey Bowler reached a decision last July, ruling in favour of HMRC.

The Willmott Dixon Tribunal Verdict

It seems that being able to determine the expenses as “relevant motoring expenditure” was the crucial factor in the decision.

On reaching a decision in the Willmott Dixon case, Judge Nigel Popplewell said:

“I totally appreciate that the way in which these payments were made and the amounts of the payments were based not on actual business use but on grades, and those grades, in turn, did not reflect actual business use but seniority.

“A similar arrangement was in place in Laing O’Rourke and this was another reason why Judge Bowler thought that similar payments in that case to the car allowances in this, were not made in respect of use. I respectfully disagree.”

“The evidence shows that in order to receive the allowances an employee was obliged to have a private vehicle available for business use.”

Laing O’Rourke has appealed its FTT decision.

With regards to the FTT decision in the Willmott Dixon case, HMRC are yet to decide whether to appeal or not.

Vehicle Guide Vehicle Suppliers
Vehicle Guide Vehicle Suppliers
First EVC Logo

ESS UK

EV Chargepoint Specialists for the home or workplace.
Find out more....

Chicane Leasing

CHICANE LEASING

We deal with all makes and models of commercial vehicles and have access to stock or factory order vehicles.

Visit Our Website

Fleeting Glance – Bitesize Chunks of Last Week’s Fleet-related News

Fleeting Glance – Bitesize Chunks of Last Week’s Fleet-related News

Elegant Themes Ad

Fleeting Glance – Bitesize Chunks of Last Week’s Fleet-related News

Our regular weekly round-up of the latest fleet news stories and snippets shows another mixed bag of news.

This week, the importance of trackers is perfectly highlighted by a company in Essex. BMW make a pledge to company car drivers. Meanwhile Fleet Evolution introduce a salary sacrifice scheme which may be of interest to smaller organisations. The Government confirm their intentions regarding plans for zero emission vehicle tax and the Kia Cee’d has a facelift.

As always, we’ll try and deliver you the news with the context of what it means – and in a way that doesn’t make you want to nod off at your desk.

So…

Essex Firm Recovers £200k worth of Equipment Thanks To Trackers.

Trackers are one of those pieces of kit that is so vital these days – and yet so often over-looked. One firm in Chelmsford, Essex though are reaping the benefits of having invested in them.

The Specialist Concrete Firm had IT and Plant Equipment worth more than £200k loaded into one of their vans and then stolen.

However, thanks to the Stolen Vehicle Recovery tracking system, police were able to locate the vehicle and the equipment within 24 hours.

As well as the cost saving, the trackers have also meant the swift recovery of the stolen equipment had minimal impact on the firm keeping going. We’d be interested to know why businesses without trackers run the risk? Is it a lack of understanding of the technology? Is it the fear of them being too expensive?

Because whatever the assumption – as this proves – they are well worth the investment.

BMW Aim to Forge “Direct Relationships” With Company Car Drivers

Glib soundbite or realistic promise?

Rob East – general manager of Corporate Sales of the BMW Group – told Fleet News in a recent interview of his intent to focus more on providing a better relationship with the company car driver.

He says;

“One thing I’m really passionate about is trying to create a relationship directly with a company car driver. As an industry, that’s always been quite challenging. You’ve always had strong relationships with the fleet managers, strong relationships with the leasing companies, but it was quite difficult to build the bridge with the actual user-chooser.”

East outlines numerous ways in which BMW aim to ‘involve’ the company car driver more – from communications during the order/delivery process to incentives, rewards and business insights through BMW’s “Inside Edge” App.

Whilst we welcome the recognition of the company car driver, by offering a company car driver an experience similar to a retail customer doesn’t just benefit the company car driver.

Affording a company car driver the same experience as a retail customer makes BMW more appealing should the company car driver become a retail customer.

What remains to be seen is how this will compare to how other manufacturers work with company car drivers – is what East is proposing unique to BMW? Is this really that ground-breaking? BMW drivers – let us know your thoughts in the comments below.

Government Pledge to Keep Company Car Tax Low Until 2025.

The Government has released a report – Transitioning to Zero Emission Cars and Vans: 2035 delivery plan – outlining it’s commitments to ensuring a switch to electric vehicles as soon as possible.

With diesel cars sales to end in 2030 and plug-in hybrid cars and van sales to end in 2035 – several measures have already been introduced.

As you are no doubt well aware – The Treasury introduced a 0% Benefit-in-kind tax for Pure Electric company cars for 2020/21 – rising to 1% for the following year. It then rises to 2% in 2022/23 and remains at that until 2025.

In the report, there is a commitment to also keep the plug-in car and van grant until at least 2022/23. As well as this, zero emission cars are to be exempt from road tax until March 2025.

Companies and unincorporated companies will also be able to write 100% of a zero emission vehicles value off when used for business use for the period it was bought. This too is until March 2025.

Popular Kia Cee’d Undergoes Facelift

New Kia Cee'd

Kia are probably best known for their “7-year warranties”. But the Kia Cee’d could be about to become their flagship vehicle…for the time being at least.

The Kia Cee’d is one of those cars that’s a bit of a dark horse. Kia isn’t really a brand that leaps out when words like “stylish” are bandied about – it hardly sets the pulse racing. It also had a stint as the car used in Top Gear’s “Star in a Reasonably Priced Car” segment – the ultimate marker of being “quite average”.

And yet, having driven these in the past, I have always been pleasantly surprised at just how good they are to drive. In fact, I’d say it’s one of the most under-rated cars out there.

They are incredibly well built and have all the right kit. You quickly see you are a world away from say the clunky Kia Picanto.

So when Kia announced they were doing a facelift of the Cee’d, I was intrigued to see how it would come out and it looks the part it has to be said.

We will of course be doing a full review nearer the launch, but some of the main highlights are that the shape looks sharper, more dynamic and – dare I say – sportier with it’s new bumpers and LED lights.

There are also some nice new safety features in there too – such as blind-spot warnings where – in immediate danger from someone at the rear – the car will provide a warning, and then can take control to avoid a collision. Nice.

The engines come in 1.0, 1.5 in petrol and 1.6 in diesel – with power ranging from 99 – 200ps (horsepower in old money). There are also more choices for exterior colours, interior fabric and alloy wheel designs than the current Cee’d. For an even sportier look, the GT-Line also looks incredible.

The new Cee’d will be out next year and reviewed here later this year.

Insurance Companies Could Replace Your Petrol or Diesel Car With An Electric Vehicle

Imagine your car or van has been stolen – and unlike our friends down in Chelmsford who had the tracking systems – the vehicle isn’t recovered. Normally you would expect a pay-out (with all the usual deductions).

However, the BBC website reported last week that insurers may now look instead to replace stolen vehicles with electric equivalents.

As part of a wider eco-drive initiative being devised by the Association of British Insurers – the idea that switching stolen vehicles for new electric vehicles makes sense, and would certainly contribute towards the switch to electric.

In addition to this change – insurers will be looking at other ways they can provide “greener” solutions. Emphasis will be placed on the recycling and use of damaged parts. For property claims, recycled or re-purposed items may be offered as an alternative to ‘new-for-old’ cover.

Smaller Organisations Can Try LEAN Salary Sacrifice Schemes

Finally this week, a company called Fleet Evolution has announced plans to launch a salary sacrifice scheme aimed at smaller organisations.

The “LEAN” scheme specialises in hybrid and electric vehicles and has been introduced to allow smaller businesses and start-ups to offer a salary sacrifice benefit to employees.

The scheme means there is a smaller pool of vehicles which – whilst not new – are all under six months old and described as being in perfect condition.

If your business is normally – or has been – blocked off from the full salary sacrifice schemes, then this could be a decent option.

To find out more, visit the Fleet Evolution website here.

 —————————————————————————-

And that’s all for this week. Just some general bits for you to follow this up from here (if you wish); 

  • If you have any questions, please feel free to leave us a comment at the bottom of the page.
  • Similarly if you are interested in finding out more about the new Cee’d or switching to Electric Vehicles, we have our panel of experts and brokers who can help – so fill in the form to get in touch.
  • If you are looking for a new car – don’t forget to check our “vehicles in stock” page for latest in-dealership stock.

Finally – please share this article using the share buttons towards the bottom as well – help us help others. Thanks.

 

Contact Our Experts

6 + 2 =

First EVC Logo

ESS UK

EV Chargepoint Specialists for the home or workplace.
Find out more....

Fleet Advisor ad
HMRC Clarify VAT on Electric Vehicle Charging Points

HMRC Clarify VAT on Electric Vehicle Charging Points

Elegant Themes Ad

HMRC Clarify VAT on Electric Vehicle Charging Points

Over two thirds of current EV registrations are for businesses or fleets. With Government grants available to help offset the cost of purchasing EVs for business, as well as savings on every journey undertaken, it is little wonder that more and more business owners are switching to EVs.

A business or fleet in the UK switching to electric vans or cars can save an estimated 20-30% in upkeep and repair costs alone compared with petrol or diesel vehicles.

This is just one of the reasons the demand for public charging points and their use for charging for business purposes is rapidly rising.

With the addition of electric vehicles still relatively new to most fleets HMRC have been asked to clarify the rate of VAT charged on these supplies as well as the circumstances in which input tax can be recovered.

What is HMRCs policy concerning VAT rates when charging electric vehicles in public places?

Well put simply-supplies of electricity through charging points in public places are set at the standard rate of VAT. There is no exemption or relief that reduces the rate of VAT charged.

What is the ‘de minimis provision’ and when does it apply?

The ‘de minimis provision’ allows for a reduced rate of VAT for supplies of small quantities of electricity.

This applies if the supply is ongoing, to a person’s house or building and less than 1,000 kilowatt hours a month.

It does not count for electric supplies provided from public charging points as they are not to a person’s house or building and are not usually an ongoing supply to one individual-therefore making it difficult to calculate the rate of supply.

So as a business how can this benefit you?

If you are a sole proprietor, charge your electric vehicle at home and you charge your vehicle for business purposes you can recover the input tax.

In order to do this you will need to keep a record of how much you are charging your electric vehicle for business use and how much is for private use as you can recover VAT on the business portion only.

Sole proprietors can also recover the input tax for charging your electric vehicle for business use at other places.

The usual input tax rules apply.

The rate for recovery of input tax for charging electric vehicles is the same as the VAT rate charged on the supply of electricity.

Does the same apply for employees who charge an electric vehicle at home?

I’m afraid not. Even if the vehicle is used for business use you cannot recover the VAT if the vehicle is charged from home. The reason being in this situation the supply is made to the employee and not to the business itself.

What if the employee charges an employer’s electric vehicle at the employer’s premises?

Well that’s a tongue twister!

Even if the vehicle is used by the employee for both business and private use you can claim the full amount of VAT for the supply of electricity used from this charging point.

The employee must however keep a separate record for both their business and private mileage as you will be liable for an output tax charge on the amount for private use.

The second option is to claim the VAT solely for the business portion in which situation the usual input tax rules will apply.

How can you maximise these benefits for your fleet?

Not only is there a huge benefit of convenience in investing in EV charging points both at your business premises and home but it could also be a long term financial benefit.

By maximising the use of these charging points you could avoid paying the VAT which would apply when using public points. If you add up all those savings for your entire EV fleet that could be a nice little saving!

Not only this but you are also able to utilise this saving for your employee vehicles too which is a benefit you’re also passing on to them.

You can read the HMRC article here.

If your business is looking to make the switch for your fleet to electric vehicles, please feel free to contact us with any questions / concerns you might have by using the form below – or ask us in the comments section at the bottom of this page.

Find out more about switching to EV

3 + 4 =

Fleet Advisor ad

Company Vehicle Warranty Extensions being neglected amidst vehicle supply issues.

Company Vehicle Warranty Extensions being neglected amidst vehicle supply issues.

Elegant Themes Ad

Company Vehicle Warranty Extensions being neglected amidst vehicle supply issues.

Vehicle Supply Issues Could Create Issues For Businesses Left Without Warranties.

Cazana – the used vehicle data specialists – report that sales of used cars have increased by almost a third. It certainly isn’t an exaggeration to say that the used car market has suddenly flourished.

The main driving factor in this seems to be the issues in the supply line for new vehicles. As a result, businesses and fleet managers, are having to make some tough decisions with their current fleet of vehicles.

With thanks to Mike Hall – Senior Account Manager at Warranty Assist – we look at the reasons behind this trend – and why current climate could be creating a huge issue further down the line.

The issue with new vehicle supply.

Before tackling the big issues, let’s just have a quick recap of why we are where we are.

As previously reported in The Fleet Adviser – there has been a vast reduction in the number of semiconductors available which has had a chronic impact on new vehicle production.

Semiconductors are used in everything, from home PC’s to fuel flow monitoring systems in vehicles and during the pandemic, demand from the automotive industry to other priority industries at the time.

issues with new car supplies have been forcing people to look at used cars

Issues with new car supplies have been forcing people to look at used cars

As a result, some car manufacturers have halted production to allow the supply of semiconductors to catch up with surge in demand in the automotive sector.

The Impact on the Used Car Market

Whilst March and April are traditionally a quieter time for the used vehicle market, this year demand has shot up – and in turn, this demand for used vehicles is a large part of the reason why used car and van prices have jumped up as well.

It should be noted here, that there are other factors that have increased used vehicles sales other than the lack of supply of new vehicles.  People having more disposable income to be able to afford a car is one factor. Even people wanting to avoid public transport during a pandemic is being cited as a contributing factor.

But for fleet managers, business owners, brokers and others responsible for business vehicles, a the issues in the supply of new vehicles, has proven to be a real problem – which in turn could lead to an even bigger problem down the road if it’s not recognised and tackled right now.

What does all of this mean for businesses like yours?

Where normally a business would be looking to switch their fleet into new vehicles, the fact is that because those vehicles simply aren’t there, the options become somewhat limited. 

The upshot is that many businesses have opted to stick with what they have. And it certainly makes sense.

But there is a potential problem in doing that;

For many businesses, the existing warranty arrangements are not being carried forward.

As a result, they could be sat on a bit of a ticking (and very expensive) timebomb.

Even for those businesses opting for used cars, whilst many used car dealers will now often offer their own warranty packages or optional packages with their vehicles.

This in itself can be problematic in instances where the warranty may not be sufficient for your specific needs.

In Conclusion.

The new vehicle market will get back to normal, but the timescales vary from vehicle to vehicle. It certainly isn’t going to be today, or tomorrow. So in the short term, carrying on with your current vehicles is a viable option.

BUT, without an extended warranty you really are running the gauntlet somewhat.  Without a warranty, you don’t need us to tell you that the implications can go way beyond repair costs.

It’s always worth checking your options – as well as peace of mind, it could save you a lot of time and money.

If you would like more information on the latest warranty offers from our extended warranty experts, then please complete the form below.

 

Find out more about extended warranty options

13 + 11 =

First EVC Logo

ESS UK

EV Chargepoint Specialists for the home or workplace.
Find out more....

Fleet Advisor ad
Why the year end is a great time to find new fleet vans

Why the year end is a great time to find new fleet vans

Elegant Themes Ad

Why the year end is a great time to find new fleet vans

For many businesses, March is the final month of the business and tax year. If your business is looking at making a profit then this month presents the ideal opportunity to bring in a new van or vans.

Why now is a good time to purchase vans for your business?

The main reason for this is that vans are classified as plant and machinery for tax purposes.

Because of this, they qualify for 100% allowances under the Annual Investment Allowance regime.

This means that 100% of the cost of the van can be used to reduce your company’s taxable profits – reducing the amount of tax you will pay.

Time is of the essence

Whilst it makes sense to acquire new vehicles before the year end, it is important you act now at the beginning of the month.

The fact is, that due to Covid and Brexit, the supply chains for most manufacturers has been severely disjointed. This has lead to low levels of vehicles being built and thus stock is very low.

This means that finding the right vehicle and getting the deal over the line isn’t something you can afford to leave until the last minute.

Think about the vehicles you need

We’ve recently talked about various incentives to switch to electric vans – with “plug-in van grants” available. It could be the right time to look into this.

But again, as with the last point – if switching to an electric van is of interest, the more time you can give to find the right deal – the better it will be for you.

In Summary

If you would like more details in regards to this – or to find out what deals and stock vehicles are available within this timeframe then please feel free to drop me a line.

Tell Me More

6 + 11 =

Fleet Advisor ad

The Salary Sacrifice Scheme – How does it work and is it worth it?

The Salary Sacrifice Scheme – How does it work and is it worth it?

Elegant Themes Ad

The Salary Sacrifice Scheme – How does it work and is it worth it?

We have recently looked at various personal vehicle leasing finance options, and in the last article we mentioned that there was an alternative way of financing a vehicle that needed looking at in more detail. This would be the Salary Sacrifice Scheme.

In a nutshell, the Salary Sacrifice Scheme is classed as a “company car” which enables employees to acquire a brand-new car over a 2-3 year period which is fully maintained, serviced and insured.

In this article we will look at how it works, what cars are available and the finer details to be aware of.

How does it work?

If you took out such a scheme for your employees, they would exchange part of their salary for a new car and the added services (maintenance, servicing etc…). As a result, this would reduce the amount of tax and National Insurance they would pay.

As the vehicle is classed as a “benefit in kind” they would have to pay a “Company Car Tax” (which would be made through an adjustment in their tax code) however this is often far less than the savings made in tax and National Insurance.

Aren’t Company Cars Expensive?

A while back it seemed like everyone had a company car. But then hikes in the tax paid meant that there was no real benefit in having one.

The recent reduction in company car tax – and introduction of very low tax at 1% for electric vehicles and very low tax for hybrid vehicles – means that a Salary Sacrifice Scheme is extremely viable once more.

Why does the Salary Sacrifice Scheme make sense?

For the Employee

There are lots of reasons why the Salary Scheme makes sense for an employee. The main reasons are;

  • Access to a brand-new car every 2 or 3 years
  • The fee includes all Servicing & Repairs so there aren’t any unexpected bills.
  • Income tax and NI savings
  • Unlimited Tyre Replacement/Repair (even due to accidental damage)
  • Access to competitive buying terms for car and servicing
  • Comprehensive Breakdown Cover included
  • No deposit required – fixed budget monthly rental
  • No credit checks to undergo
  • Fully comprehensive ‘Business’ Insurance fixed for 3 years (regardless of claims)
  • Includes road tax (if applicable) for the whole contract
  • An additional 2 named drivers allowed (min 18 years)

For the Employer

As well as offering a popular employee benefit, your business can make substantial savings in National Insurance contributions – with as much as £350 per ultra-low emission car.

Would the employee own the car?

At the end of the 2-3 years they can either hand the car back, or take an option to purchase the vehicle.

What type of cars are available?

Most cars are available under the scheme – however the biggest savings will be on electric and hybrid vehicles. As mentioned earlier, there is just 1% company car tax on electric vehicles and very low tax on hybrid vehicles.

As well as the biggest savings being on Electric and hybrid vehicles, they are often the best fit of many employees’ driving use. This makes EV’s and Hybrid vehicles a good choice for practical reasons too.

There are also some decent savings to be had on certain petrol and diesel vehicles with low emissions.

To find out more about the best vehicles for your employees needs, we’ll be happy to guide you further if you get in touch.

Other considerations

An employee must have completed 6 months in your organisation. They must also consider whether they are going to be there for 2-3 years. There could be financial penalties should they voluntarily leave employment before the end of the agreement.

In conclusion

There are many benefits to the Salary Sacrifice Scheme for both employees and employers alike. If you would like to find out more about the scheme or the vehicles available, please don’t hesitate to get in touch using the form below.

Tell Me More

13 + 12 =

Fleet Advisor ad

Pin It on Pinterest