Company car ‘unavailability’ periods during furlough

06 April 2020

With the country on lockdown and people working from home, the question of whether an employee can reduce their company car benefit during periods of furlough (or an extended period of working from home) is something that has been highlighted by a number of my clients recently.

Unfortunately, there is no definitive guidance on this issue as yet from HMRC.

However, this question may be relevant to many companies during these unprecedented times, so I thought it may be useful to summarise current legislation and HMRC guidance for those employers who may find themselves presented with such a question from employees.

Current tax legislation states that a car has to be unavailable for a minimum period of 30 ‘consecutive’ days to be classed as unavailable. The importance here is that the car has to be unavailable to the employee and not simply the employee being unable to use the car.

HMRC’s Employment Income Manuals set out the specific circumstances where a vehicle is not classed as unavailable. The key indicator, pardon the pun, being that the car is ‘withdrawn’ from the employee when they have no authority to access the car.

EIM25170 of the HMRC Employment Income Manual does helpfully state that HMRC would accept that a car is unavailable where all the keys are kept in the possession of the employer and the employee has no authority to request that the keys are returned to them and are unable to gain access to the car.

As you can imagine, returning a company car is probably not considered essential travel and I have doubts about whether there is public transport or a non-family or household member who can safely take you home even if you could, whilst keeping in accordance with social distancing rules.

The obvious answer is to send the keys back to your employer until things return to normal and make sure that everything is clearly documented and evidenced should HMRC want to check the circumstances in future, as they have the right to do.

Nevertheless, in these uncertain and historic times we are living through any savings or benefits that can be secured are worth exploring.

And finally, whilst the above focuses on the current situation, periods of unavailability can happen at any time through injury, illness or even a driving ban, so providing that the conditions are met and the car is truly made unavailable to all members of the household and beyond, remember something positive can still come out of adversity.

Stay safe everyone.

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