COVID-19: Company car use during the restrictions

May 05, 2020

If an employee usually has the use of a company car but now during the COVID-19 restrictions the car is not in use, then the employee should consider giving the car back to their employer. This bulletin looks at the position in both Ireland and Northern Ireland.  

For Irish employees, handing back the company car to the employer will reduce the tax charge that would otherwise arise on the benefit of access to the company car. If the employer takes back possession of the vehicle and an employee has no access, no benefit-in-kind applies for the period.  Similarly, if the employee keeps the company car but is prohibited from using it by their employer, no benefit-in-kind arises, provided that the employee does not use the car for any private purpose and proof of same is recorded.   

Where an employee has a company car and they have limited or reduced business mileage during the period of the COVID-19 restrictions and personal use is limited, then mileage travelled in January 2020 may be used as a base month for the purposes of calculating the amount of benefit-in-kind due. If the employee continues to undertake business travel as usual in the company car, the usual tax rules on benefit-in-kind will apply.  The Irish Revenue has published details on this treatment on their website.   

For those employed in the UK and Northern Ireland, HMRC’s view on company car benefits is that the benefit charge applies where a car is made available for private use, whether or not it is used. For example, a car kept on an employee’s driveway during a period of furlough would still be considered to be made available. However, a benefit in kind for tax purposes does not arise if the vehicle is not available for 30 consecutive days or more. This also applies to the fuel benefit if the employee is provided with private fuel.  

Under the UK coronavirus job retention scheme, the benefits in kind of employees who have been furloughed are not covered under the scheme. This means many employees are still facing expensive tax bills on company cars whilst at the same time they are dealing with a 20 per cent cut in their pay, if their employer does not top it up.  

HMRC has advised that if employees are able to hand the car back to their employer then it will not count as available. Usually HMRC would expect the car to be handed back to the employer so that it cannot be used.  

This may not be practical due to lockdown restrictions. However, exceptionally, they will accept that where all the keys (or tabs) are in possession of the employer, and the employee does not have the authority to request the keys are returned to them, the car would be unavailable. This could be achieved by posting the relevant items back to their employer. 

See HMRC’s guidance on this topic