In Coopers v HMRC [2012] UKFTT 439 (TC) TC 02120 a partnership was set up to provide cars to a company owned by the partners, who were also its directors in an arrangement aiming to avoid car benefit charge. The Tribunal found that the partnership was "little more than an extension of the company set up and operated in order to avoid or reduce income tax and a National Insurance charge for the company." In paying the partnership to provide cars which were used by the directors, the company was indirectly providing cars and fuel "by reason of employment" and so a tax charge resulted for the directors with Class 1A for the employer.

See Tax masterclass: running an LLP & Co structure for guidance on how to avoid a similar charge.