18 September 2017
Samuel Johnson compiled the first dictionary of the English language back in 1755. Whilst the definitions that Dr Johnson produced would not have included some that we work with within tax today, definitions and interpretations are everything, because based on these, the tax treatment follows.
Whilst most items will have an ordinary meaning/interpretation some will be specifically defined within the Taxes Acts. In my previous blog ‘Capital allowances – Can I make a claim on my vehicle?’ I set out the statutory definition of a car and how this was applied for capital allowance purposes. There are other definitions within the Taxes Acts that covers Vans (Section 115 ITEPA 2003); Caravans (Section 1314 CTA 2009); Classic Cars (section 147 ITEPA 2003); Motor Cycles (Section 94G ITTOIA 2005 and Section 185(1) Road Traffic Act 1988) and mileage allowance (Section 229 ITEPA 2003) but other terms are not defined like ‘car allowance’.
We continually come across situations where we are asked queries on terms that potentially have an impact on other areas. Recently we were questioned as to why an employee was receiving a ‘car allowance’ whilst driving an employer provided van, which appears at face value a good question?
Taking instruction from the client and appreciating what they understood from the non-defined terminology ‘car allowance’ soon established that their use of that term was merely to provide the employee with more money in terms of their monthly take home pay, but not wanting it to form part of the employees ‘basic salary’ for other reasons.
It is important to understand what the client is trying to achieve and what they are providing in terms of vehicles and benefits to ensure that the whole package of allowable deductions, capital allowances, VAT, PAYE and employee liabilities are covered off to ensure that the correct advice is given.
If you need further advice then please contact me or your local UHY contact. Alternatively, if you would like to read more of our automotive related blog posts, please click here.
