Tribunal: Accountant’s advice re company cars was no good
The tax advice given by accountants in 2006-07 aimed to reduce the tax and NIC cost of two client company directors obtaining new cars. HMRC disagreed with the advice and charged additional tax and NICs which were the subject of an appeal heard by the first-tier tax tribunal.
The directorshad each wanted to arrange leasing agreements to acquire new Mercedes cars valued at £70,000. The accountants advised them that if the lease agreements were in the Company’s name there would be very high tax and National Insurance liabilities. However if the directors were charged by the Company with all the costs of the leases then the company was acting as nominee and there would not be the attendant tax consequences.
The directors followed the advice they were given and the cars were leased in the name of the company. No personal guarantees were given by the directors who reimbursed to the company all the costs of the cars such as leasing, petrol, insurance, road tax, repairs and maintenance.
Following an employer compliance review the company’s tax treatment of the company cars was reviewed by HMRC and notices were issued charging the company for national insurance contributions and charging the directors in respect of tax due on a car benefit.
The tribunal had to consider whether there was any agency or nominee arrangement preventing the charge to tax. Whilst the tribunal found the directors to be straightforward and honest there appeared to be no evidence they had attempted to make any agency or nominee agreement. The contract was in the name of the Company, the legislation was satisfied and so a benefit arose. The taxpayers’ appeals were dismissed.