A ban on the private use of a company van is generally not possible for a director and major shareholder. This has been confirmed by the Supreme Court in a ruling dated 16 March 2018. The Supreme Court, incidentally, dismissed the case summarily, noting that there were no legal questions to be answered. The ruling The ruling of the Arnhem-Leeuwarden Court of Appeal is thus upheld.
Prohibition on private use
The case concerns the sole shareholder and sole director of a private limited company (a DGA). A business is operated through the private limited company. And, naturally, the DGA works for the company. In this context, he has entered into an employment contract with the company. This contract stipulates that he is prohibited from using the company’s van for private journeys. In response to enquiries from the tax authorities, the DGA stated on two occasions that he had not kept a mileage log for the van.
A ban on private use is a recognised way for delivery vans to avoid the tax-related additional tax liability on salary (this cannot be applied to passenger cars). However, this is subject to the employer checking whether employees are breaching the ban. If they are, the employer must impose a penalty agreed in advance.
The Court agrees with the Tax and Customs Administration that the prohibition in this case has no practical significance. After all, the party concerned is the director and major shareholder of the company. It is therefore not obvious that compliance with the prohibition would actually be monitored. After all, the director and major shareholder would then be monitoring himself.
Behind the gate
Incidentally, the director and major shareholder primarily argues that the van was not made available to him for private use. This is because he parks the van on the company’s premises after use. After the business has closed for the day, the van is parked there behind a lockable gate.
However, the director and sole shareholder has the key to the gate. And, as the sole shareholder and sole director of the private limited company, he is free to decide for himself whether to use the delivery van outside the company’s opening hours. The Court therefore finds that the Tax and Customs Administration has demonstrated to a sufficient degree that the delivery van is at the sole director and shareholder’s disposal.
Fine
Naturally, the director and major shareholder will be liable for a penalty in addition to the additional payroll tax assessments. The Tax and Customs Administration has imposed penalties for the late payments. This late payment penalty amounts to a maximum of €4,920 (per year) for the years in question.
The director and major shareholder argues that this is a defensible position. He believes he can reasonably assume that the car was not made available to him for private purposes and/or that he would be able to provide evidence to the contrary. However, the Court of Appeal ruled that, judged by objective standards, he could not reasonably have believed this. The late payment penalties were therefore rightly imposed. They had, incidentally, already been reduced by the Tax and Customs Administration to €2,083, €2,938 and €1,252. According to the Court of Appeal, this was an appropriate penalty given the circumstances of the case.