Q&A: Benefit in Kind for a hybrid car

Q. I’m a shareholder in a family-run trading company. Last year I purchased a hybrid car through the company. The relevant BIK percentage is 14%. With the recent increase in fuel prices, I’m considering having the company purchase the fuel for the car and reimburse it for the private fuel. Can I do so without incurring a benefit in kind? Currently I don't claim anything as business journeys tend to be within the battery range of the car.

A: In theory yes, but if you don't reimburse every penny, you will incur a taxable benefit of 14% x £25,300 = £3,542. You will pay tax on this, and the company will have to pay Class 1A NI. You would have to keep meticulous records to precisely determine your private mileage. This may be difficult to do in practice.

An alternative is to have the company pay you at the approved mileage rates for your business mileage. As your car isn't fully electric, you will be able to claim at the appropriate rate for petrol or diesel cars accordingly. As the business mileage is generally covered by the electric range, this would be very efficient. The latest rates are available here and are updated quarterly.

About the Author

Beverley Howells

Partner

Beverley is a partner with Torgersens, specialising in tax. Her role covers all aspects of taxation, from managing compliance to providing business advice. Her main areas of expertise are in business tax and corporation matters and in particular, acting for owner-managed businesses. Having joined the firm as a graduate trainee, Beverley qualified as a Chartered Accountant in 2000.   Outside of work, Beverley’s favourite place is the beach, enjoying a walk along our beautiful North East coastline. Ideally, she would be joined by a canine companion and has recently started a campaign for her own office dog! 

To get in touch please e-mail beverley.howells@torgersens.com.