In HMRC v Apollo Fuels Limited [2016] EWCA Civ 157, the Court of Appeal has ruled against HMRC confirming that no car benefit arose to employees leasing cars from their employer at market value.

This case was first brought before the FTT in 2012.

  • A number of group companies had leased cars to its workforce in return for an arm’s length hire charge.
  • The companies decided that no benefit was transferred to the employees and made no tax deductions or disclosures to HMRC.
  • HMRC had sought to assess the employees to tax in accordance with ITEPA 2003 Chapter 6 (taxable benefits: cars, vans etc).
  • HMRC also sought to recover Class 1A NIC from the companies.

The Court decided that  

  • The employees had paid a full market rate for the lease of the cars.
  • ITEPA 2003 Chapter 6 could only apply where there was a benefit to the employee.
  • In the ordinary sense of the word there was no benefit to the employee in this case.
  • No benefit in kind tax or NIC charges arose.
  • The employees were entitled to tax-free mileage allowance payments as if they were using their own cars.

In making their decision, the Court upheld previous decisions by the First Tier Tribunal and the Upper Tribunal.


HMRC has long been suspicious of "car schemes". Unfortunately, this win for the taxpayer has limited practical value due to legislative changes made in response to this case.

  • Firstly, in 2014 changes were made to ITEPA 2003 s114 to remove a reference to the "benefit of the car".
  • Secondly, legislation is to be introduced by Finance Bill 2016 which clarifies that there is no requirement for there to be any benefit transferred to the employee for a benefit in kind charge to arise.

Clause 7 of Finance Bill 2016 inserts Subsection 1A into ITEPA 2003 s114:

“In determining for the purposes of this Chapter whether this Chapter applies by virtue of subsection (1) to a car or van made available to an individual it is immaterial whether or not the terms on which the car or van is made available constitute a fair bargain.” 

The same amendment will also be made for living accommodation and employment-related loans.


Court of appeal reference: HMRC v Apollo Fuels Limited & others [2016] EWCA Civ 157

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