I spotted this case on the HMRC website the other day…
Elm Milk Ltd 2006 STC 792
A business bought a car for its managing director. It recorded a resolution that the car was for business use only. The managing director had another car that was used for private journeys.
The Court held that there was no reason why a car could not be made unavailable for private use by suitable contractual restraints, and that a company could enter into a binding employment contract with its sole director. Therefore, on the facts of the case, the car was available for business use only and input tax could be reclaimed.
The court held that HMRC had given too much weight to the physical constraints and insurance and should have focused on contractual constraints, the employment contract and board minutes.
The following case is also very interesting…
The ‘Shaw’ case
In the Shaw case the taxpayer bought two BMW X5 vehicles together, one for use in his farm business, the other for use privately. Mr Shaw also owned two other cars privately as well. HMRC [again] argued the case based on the social and domestic cover on the insurance policy, but Mr Shaw rebutted this by showing how the insurance policy for his combine harvester had ‘social, domestic and pleasure’ cover too! He added that the premiums for both the X5s and the harvester were lower as a result.
If there is No Private Use then there is no benefit in kind and no fuel scale charges.
So what should you do to prove there is no private use:
- Keep the car on the company’s business premises
- Keep the keys at the company’s business premises
- Prepare a Board Minute
- Makesure your contract of employment bans private use
- Keep a mileage log
- Insure the car principally for business use
Unlike Pool Cars you don’t have to prove it was available to other employees
4 thoughts on “How do you prove ‘No Private Use’ of a company car?”
So – first question a year after posting. What if your company has no premises? Would the mileage log suffice?
I’m entering into the world of software contracting, would this mean that I could get around the “ordinary place of work” rule for commuting, as it is unlikely that I would stay beyond 24 months?
I don’t think HMRC will agree there is no private use if the vehicle is kept at home, I have some separate blogs covering mileage
We have a Limited Company. I serve the Midlands are from my office at home and my fellow director serves the south west from his office at home. We have no business premises apart from an office at home.
plus we need to react to callouts as we are a 24hr business.
We will be utilising a leased car each which we will use to carry out business use only and we have passed a special policy/resolution to forbid any personal use. We have our own personal vehicles.
Having no premises surely this does not pose a problem and its on a case by case basis .
Unless you can keep the car at a location other than your house it will be tricky, another option would be for you and your fellow director to be self employed and supply services to your company, the rules for cars are much better for the self employed https://stevejbicknell.com/2014/05/19/self-employed-claimable-motor-expenses/
Do you have an accountant? do you need further help?