In Smallman & Sons Limited, Lisa Garrity & Brian Garrity v HMRC [2021] TC8242, the First Tier Tribunal (FTT) held that Income Tax and Class 1A National Insurance was due on cars leased by the employer company but paid for by the directors using them. There was no carelessness, so the four-year time limit applied and some liabilities and penalties fell out of charge.

Over a period of several years Smallman & Sons Ltd (SSL) had acquired four second-hand cars on lease-purchase agreements.

The FTT partially allowed the appeal. Class 1A NIC’s and Income Tax were due up until SSL paid the option fee to acquire the cars, and where assessments had been issued within the four-year time limit. Penalties issued outside the four-year time limit were discharged.

Useful guides on this topic

Company cars
Company car tax: How do you work out car benefit? How do you work out car fuel benefit? Are there savings for low-emissions vehicles? How do you reduce car benefit? Cars and the tax tribunals and Top Tax Tips.

Making good Benefits In Kind
From 6 April 2017 onwards, if an employee wants to make good on a non-payrolled Benefit In Kind they will have to reimburse their employer with the cash cost of the benefit by 6 July in the following tax year.

P11Ds: top tips tool kit
Top Tips for employers on preparing form P11D together with a checklist.

Penalties: P11Ds
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Penalties: Errors in Returns and Documents (subscriber version)
What penalties apply if you make an error or mistake? How are penalties calculated? How do you check penalties? What can you do if you receive a penalty?

Client guide: Reasonable care and tax penalties
What triggers a tax penalty? What standard of care is expected from a taxpayer? What is reasonable care? When is an error careless?

External link

Smallman & Sons Limited, Lisa Garrity & Brian Garrity v HMRC [2021] TC8242


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