Personal Tax Liability on Selling Car at a Profit

[Carlblues7]

Hi there,

I am after some guidance with regards to personal tax liability after selling my car and making a profit above the acquisition price.

I purchased my management loan car from Ford Motor Company after paying the settlement value of £14,120 in October 2022. I kept the car for 8 months and sold it at the end of June 2023 for £16,984.

Following a Ford audit, they advised that I was not able to sell the car at a profit and that I have to pay a tax liability of 20% on the profit. Note that I am a retired manager with Ford.

Having reviewed with HMRC in Newcastle, they advised that as I was the registered keeper of the vehicle since October 2022, then it was classed as a wasting asset and I could sell the car as and when I wanted to without any tax liability on profit. If I was classed as a trader, then tax would be due. I sold the car to a franchise dealer.

Ford dispute this and state that I have a tax liability. I have advised that they cannot take any tax from me as only HMRC can action that with me directly. However, as reviewed twice with HMRC, the car was my personal asset with the registration document in my name as registered keeper.

Therefore, any additional guidance would be greatly appreciated.

Finally, there is no CGT to pay as it's a wasting asset with a projected lifespan of 50 years and does not fall into the category of being a classic, etc

Regards
Carl

[MaryS57]

As it was a private sale, it's not clear why Ford would have the right, or facility, to deduct CGT.

In any event, if CGT is erroneously deducted you can reclaim from HMRC via filing a Self Assessment (SA) Tax return.

I too have been erroneously charged twice by HMRC for a small capital gain, and I am in the process of reclaiming the over-charge from HMRC.

[Carlblues7]

Thanks for response.

I outlined CGT at end as they cannot apply this tax as wrong vehicle category.

They state that because I sold car at a profit of £2,,864 above my purchase price that I owe a personal tax liability of £572.80 (tax @ 20% base rate.

I understand that I would owe HMRC tax if I was a car trader, however this was a 1 off sale as a private individual, 1st time I had actual sold car without using it as a part exchange. The V5C was in my name as the registered keeper and vehicle was 32 months old without any finance.

The whole issue seems to be that I made a profit selling my previous management role car I had purchased from them and they are classing it as a benefit in kind profit.

[atticus]

What are Ford intending to do about it, if anything? Will they make a deduction from your pay? If so, will you be able to recoup it through your tax return?

How do they know about the price for which you sold your car?

[Carlblues7]

They carried out an audit and advised that I had not adhered to the scheme rules in that I did not keep the vehicle for the required holding period.

I initially signed a 12 months fixed sum loan agreement, but this was extended by an email from Ford Credit due to delays in supplying a replacement. I therefore made 24 months of payments and then settled the loan and became the registered keeper. I kept the car for a further 8 months and sold it when it was 32 months old. It must be noted that upon signing the agreement it clearly states that title of the vehicle passed from Ford to myself upon delivery, yet I do not become the registered keeper until I settle the finance. Ford state that I had to keep the car for 12 months after I settled the finance, whereas I only kept it for 8 months

They stipulate that I MUST NOT make a profit when I sell the car.

They have requested me to supply the price I sold the car for, otherwise they will make a market value estimate and then apply a tax liability to the profit made.

I have argued that as title passed to me upon delivery as outlined on the agreement (CCA 1874 applicable), then the car is mine to sell as a private seller, especially with V5C in my name. HMRC advised me that I can do whatever I wanted to do with the car and if I sold at a profit then that's my good luck and there would be no tax liability.

I believe that Ford don't appreciate the fact that I made a profit and not them and are taking me to task.

It must be noted that I purchased a later car which I still own, which is eligible for me to sell in November having met the scheme rules. If I sold this car, I could make a profit of £4k+, yet they stipulate that I must not make a profit. This would imply that I would have to keep the car until it was circa 5 years old before I could sell it for less than my purchase price, surely this is not legal binding.

[Carlblues7]

As I am a Ford pensioner, they are implying that they would take any taxable benefit directly from my pension.

I do not complete tax returns as my pension is my only income, which is taxed accordingly.

[Carlblues7]

Good morning,

Please see my above post dated 25th July 2024, 10:00:AM.

Are you able to provide a response to my points raised.

Regards
Carl

[PallasAthena]

Reading this for the first time I think what Ford are claiming is that the car was sold to you at below market value under a scheme for employees. There is a potential benefit in kind payment to you in that arrangement which would be taxable as income.

Their argument seems to be that if you keep the vehicle for a minimum period of time, as required by the scheme rules, that benefit does not accrue. But if you sell it sooner - as it appears you did - the benefit in kind is taxable and the amount of it is the difference between buying and selling price.

However if that is their position I would expect them to have reported it to HMRC. Employers are required to report benefits in kind. Normally HMRC then adjust your tax code to collect tax due on the benefit in kind. They can do this for the tax code on your pension.

So they aren't saying they are taxing you on profits directly but that it is an income tax issue of tax on a benefit on kind you received from Ford (ie Ford selling to you at a discounted price because you were an employee).

Does that make sense to you? I am not an expert on tax, just offering a different perspective on what has been posted so far.

[Carlblues7]

Hi,

Thanks for responding to my post.

As you have read the full string, you will note that I purchased a further vehicle (Ford Puma) in November 2023, therefore by November 2024 I would have met both criteria of car being greater than 24 months since registration and I had kept car for 13 months after settlement.

I can therefore sell this car without breaking g the T&C's and on current valuation, make a profit of over £5,000. On this basis, I do not owe any BIK tax on profit. However, Ford stipulate in the scheme that participants MUST NOT make a profit when selling their vehicle, I believe that this is an illegal statement.

With regards to BIK, I have been through HMRC website and established that the Fixed Sum Loan Agreement that all participants sign for these vehicles are exempt from BIK under section 17.19 (as detailed below):

Exemption for loans for fixed periods at a fixed rate of interest 17.19
Section 177

There’s no chargeable benefit in any year of assessment on a loan made to a director or employee if the loan:

is for a fixed and invariable period
is at a fixed and invariable rate of interest
when the loan was first made, the interest paid on it in the year it was made was not less than the interest calculated at the appropriate official rate for that year
The tests to be satisfied for this exemption are stringent. The loan must be for a specific period which cannot be varied under any circumstances and the rate of interest must be fixed and incapable of alteration.

Your thoughts would be appreciated.

[Carlblues7]

Note that the rate of interest applied to loan was 8.5%, whereas the official government rate at the time was 2.25%