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Avoiding benefit in kind tax charges on company cars

Avoiding benefit in kind tax charges on company cars

We are often asked about setting up a partnership structure to operate cars for the director / shareholders of existing limited companies.

Our reply is that the partnership would need to be carrying out a business activity in its own right to avoid challenge, however we are aware that others have promoted such planning regardless.

Well, the bad news is that one such structure has now been challenged by HMRC. The case has been heard by the tax tribunal (FTT) and the judge found for HMRC.

As we have always feared, the tribunal took the view that the partnership was formed primarily to hold the cars and not for business reasons. As the partnership was totally dependent on the limited company with which it was related, the Tribunal held that the cars were made available to the taxpayers by reason of their employment with the company and so should be taxed as a benefit in kind.

For more information, please contact Lesley Sutton on 01484 550037 or email lesley.sutton@revellward.co.uk.

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