Benefits in kind – pool cars – quality of evidence

Tue 01 Jul 2014

When the requirements for a pool car are met there is no benefit in kind on the employees.  History is littered with many failed attempts by employers and employees asserting that a car is a pool car.  Frequently it becomes evident that in reality one director or employee used the car exclusively – and the car itself was a luxury model.  We have a report of a case with a happier ending for the taxpayer.

The required standard of proof for a pool car was one of two issues considered in a FTT case, Isocom.    The company had two cars which were used by employees for the company’s business and for private use.  The FTT heard evidence from the director of the company, examined the company handbook and the insurance certificate.  The company had not maintained detailed logs of use.  The FTT found for the taxpayers and stated:

“Whilst we acknowledged the submissions on behalf of HMRC that it is clearly best practice to have records such as those suggested by [HMRC], we note that such documents are not required by statute and we took the view that in an office with only a small number of employees use of the pool cars could be easily controlled without formal processes. In those circumstances we were satisfied that the company’s lack of records was not fatal to the case.”

The case shows that when it is evident that the car is a pool car lack of records is not necessarily fatal. The other issue, on which the company was not successful, was whether penalties should be imposed on a company that had suffered due to incorrect returns fraudulently submitted by an employee who was subsequently convicted of criminal behaviour.