Company Car

[John Barry]

I am the director of a company and own 51% of the shares. My wife is genuinely employed by the company and owns 49% of the shares, although she is not a director.

She receives no wages or other benefits by virtue of her employment.

I would like to buy her a company car in lieu of salary.

I am correct in thinking that as her remuneration package would be less than £8,500, (including the notional P11d benefit)the car would not be assessable as a benefit, and there is no tax to pay by the company for providing or my wife and receiving the benefit?

[Nigel Lord]

John

Your wife would almost certainly be treated as being provided with a car by virtue of your office as a director and you would be taxed on the full benefit in kind.

Furthermore, no Inspector of Taxes would accept that an 'employee' remunerated at a rate of less than £8,500 could justify the provision of a company car and accordingly, the expenditure would be disallowed for Corporation Tax relief purposes.

Finally, the cost of the car would count as earnings in computing the £8,500. When adding on the benefit in kind charge, it would almost certainly take you over the limit.

I have seen this type of strategy used in the past (early 90's and before) and when identified by the Inspector, the tax, interest and penalties have been prohibitive.

If you require any further assistance please do not hesitate to contact us, and we will be happy to act on your behalf.

Nigel Lord
Lord Associates
Taxation & Business Consultants
Caxton House
Old Station Road
Loughton
Essex, IG10 4PE
020 8418 9101 & 07769 931852
mail@lordassociates.co.uk