Employers are subject to fringe benefit tax (FBT) for every day a vehicle is made available to an employee for private use.The view of some tax practitioners and taxpayers was that where an employee leaves the vehicle at an airport whilst out of town, the vehicle is not available for their private use, and therefore is not subject to FBT on the days the vehicle is at the airport.
However, Inland Revenue has released Interpretation Statement 17/07 Fringe Benefit Tax – Motor Vehicles which states this view is not correct and that the employer may still be subject to FBT on those days.The Interpretation Statement distinguishes between a vehicle being left at an airport for both business and personal reasons and comes to different conclusions in these two situations.The interpretation statement includes the below examples:
Question 1: Instead of travelling by car to Napier, CWL has Chris fly so he can maximise his time in Napier and visit some additional clients. He parks his company vehicle at the airport and makes the journey by plane. Can CWL take advantage of the business travel exemption?
Answer 1: No. CWL cannot take advantage of the business travel exemption because Chris is not “with” the vehicle while he is absent from home. Because the business travel exemption cannot apply, whether a vehicle is subject to FBT on a day that the vehicle is parked at an airport must be determined according to whether the employer has made the vehicle available to an employee for their private use on that day. In this example, CWL has effectively removed Chris’s access to the vehicle by requiring him to fly to Napier on business.
This means that CWL is no longer making the vehicle available to Chris for his private use. CWL still needs to account for FBT on the day of departure and the day of return, as Chris’s vehicle is not subject to a private use restriction. This means the vehicle is still made available to Chris for his private use on the day of departure and the day of return. Only day two is therefore exempt from FBT.
Question 2: Chris decides to take his family to Fiji for a holiday. Chris drives to the airport and leaves his company (CWL) vehicle in the long-term stay parking area. Does CWL need to pay FBT on Chris’s vehicle for the week he is in Fiji?
Answer 2: Yes. Whether a vehicle has been “made available” for private use depends on the actions of the vehicle’s proprietor, not the actions of the employee. CWL has made the vehicle available to Chris for his private use. CWL has given Chris access to the vehicle and permission to use it. Chris’s own actions have resulted in him being unable to access the vehicle while he is in Fiji. However, this does not change the fact that CWL has made the vehicle available to him for private use during this week.
Question 3: Would the position be different if Chris left the vehicle at his house and caught a taxi to the airport?
Answer 3: No. The same principles apply. CWL has made the vehicle available to Chris for his private use. Whether Chris leaves the vehicle at home or at the airport makes no difference.
Previously, it was unclear whether an employer was liable for FBT on insurance premiums paid where the policy insures employees, the employer receives any proceeds and the employer then passes the proceeds onto the employee or their estate. Inland Revenue has clarified this issue in QB 17/10 – Income tax and fringe benefit tax – Insurance – Group insurance policy taken out by employer for the benefit of an employee and concluded that the insurance premiums are subject to FBT when certain conditions are met.
QB 17/10 states that the employer will, generally, be entitled to a deduction for the premiums paid and the premiums will be subject to FBT where all of the following conditions are met,
The Interpretation Statement also concludes that it is likely that amounts paid to the employee or their estate will not be income.
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