(as published in the Gibraltar Chronicle)

You previously mentioned that benefits in kind are taxable.  My employer provides a car which I need for my work, and I sometimes use it outside work.  As it’s used mainly for work, presumably I don’t have to pay much tax on the private use?

Tax is payable on the “cash equivalent” of the benefit-in-kind (“BIK”) received; this benefit is regarded as being 25% of the purchase price of the car each year, for four years.  So if the car is kept for six years, there is no tax arising in years five and six.  This applies whether the car has only occasional or frequent private use.  According to the legislation it even applies if the car is “available” for private use.  Private use includes taking the car home at night and, yes, it even includes using it for your weekly shop.

There is also tax on the fuel provided for such a car; tax is applied to 90% of the cost to the employer of the fuel.

Where only occasional private use of a company car is made this is obviously not very tax efficient – the tax could be a lot more than the real benefit you obtain.  Incidentally, the above also applies to vans up to 3,500 kgs.  Apart from using the car more, on the basis that you’re being taxed on it anyway, possible solutions could be:

1. Stop all private use of the car, and ensure that it’s parked at or near the work premises overnight.
2. Ask for a company motorbike or scooter instead, as these are specifically exempt from being a BIK.  Trucks and vans exceeding 3,500kgs appear to also be exempt according to the legislation (that’s design weight, so sticking sandbags in your Suzuki van is not a solution).

What about office parties?

Provided that the total cost per head of such parties in any tax year does not exceed £75, then there is no liability.  Cost per head is worked out by dividing the total cost, including any transport or accommodation by the number of persons attending (whether or not they are all employees).  Above that, the benefit is taxable (but bear in mind that no tax is payable if your total BIK is less than £250).

Who pays the tax – me or my employer?

Usually the tax is deducted as part of the PAYE system as if the benefit was additional salary.  However, your employer can apply to pay the tax on your behalf.  The advantages of this is that the tax paid is not itself included as a benefit in kind, and the tax rate used is 20% for benefits up to £15,000 (first £250 at 0%) - likely to be lower than the tax rate you’re paying on your salary.

We’ll cover more benefits in kind in another issue …