We often hear about the commonly held – but mistaken – belief that a company car leased in your businesses’ name does not attract a ‘benefit in kind’ tax charge if you, or your employee, repays the cost of the lease to the company.

But what is not so well known is that in 2016, the Court of Appeal ruled that no benefit was transferred to employees when they reimbursed the market value of their lease car. And as is often the case when HMRC is challenged, the law was quickly changed.

As a result of the changes made in the Finance Act 2016, even where the full cost of a lease is reimbursed, a company car benefit must be assessed.

And therefore paid.

Payments made by the director or employee will reduce the taxable amount, but not usually to zero. More often than not, there is significant tax to be paid, even when there is no real monetary benefit.

Many SME’s and owner-managed businesses can find themselves inadvertently caught out by this legislation, especially if a lease car is being paid for through the company and recharged to the Directors Loan Account. If you would like to discuss the tax implications of lease cars or arrange a review of your personal arrangements, please contact Paul.Edwards@affordbond.com or complete the Contact Us form on our website – the success of your business will always be in the detail.