How will company car expenses be treated?
In calculating the IR35 deemed payment on which PAYE tax and NICs must be paid, expenses which would be allowable under section 198 ICTA 1988 can be deducted. This will include traveling expenses, and if a car owned by the company is used for business travel then a deduction can be made for the costs of that business travel in the same way as if the worker had used his own car. For example, it would be possible to use HMRC's authorised mileage rates, which include an element for depreciation. Expenses incurred in the course of private use of the car cannot be deducted in calculating the deemed payment.
A car provided by the Personal Service Company for the worker's private use will give rise to a car benefit charge on which the worker will be taxed in the normal way. The amount of the car benefit charge can be deducted in calculating the deemed payment.
The PSC will be able to set any costs of providing the car, including capital allowances, against its taxable profits.
Class 1A NICs paid on the company car benefit will be deductible in the calculation
of the deemed payment, alongside other employer's NICs.
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