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 The cost of being provided with a company car has reached extremely high levels and whether to make use of a company car for private purposes now requires careful consideration to minimize the tax costs.
There are a number of factors that can be considered including the following...
- The Basics - the company car tax charge is based on the list price, the CO2 emissions and the type of fuel. The lower the list price and CO2 emission the lower the charge and petrol is better than diesel. Gas and electric cars are even better.
- Classic Cars - those cars aged 15 years or more with a market value of £15,000 or more have the market value applied (subject to an £80,000 cap) instead of the list price but for those worth less than £15,000, list price is used which may be very low.
- Pool Car - if a company car is not normally kept at any individual's residence, is not just used by one employee and where any private use is incidental to the business use, the car can qualify as a pool car and not be a taxable benefit at all.
- Cars in a Sole Trader or Partnership - by running a car through an unincorporated business for the business owner there is no benefit in kind. Instead the tax deductible expenses that can be claimed on the car are restricted by the private proportion of use but overall this is far more generous. Some businesses will split their business into two trading elements with the cars being held in the unincorporated side.
- Cash Contribution - the list price that the car benefit is based on is reduced by any capital contribution made by the employee up to a maximum of £5000. It is possible for the company to loan the employee this amount as well interest free without their being a benefit in kind on the interest free loan.
- Company Vans -
from 6 April 2005 there is no taxable benefit where employees have to take their company vans home and are not allowed any other private use. Otherwise, the taxable benefit for the private use of a company van and fuel, if supplied, is £500 or £350 (vans less or more than four years old) per annum, until 5 April 2007.
However, from 6 April 2007 the taxable benefit for the unrestricted use of company vans is £3,000 (with no reduction for older vans) plus a further £500 of taxable benefit if fuel is provided by the employer for private travel. Vans are generally those built to carry goods rather than people.
- Private Fuel - a charge for private fuel applies even if only a minimal amount of private petrol is used so it is often better to avoid this in the first place or look at repaying the private fuel provided to avoid the charge.
- Home to work travel - be aware that this counts as private travel, not business travel.
- Tax Free Mileage Allowance - if you own the car personally and use it for business purposes, you can charge the business for business mileage and receive the amounts tax free. This is presently at 40p per mile for the first 10,000 miles and 25p thereafter and can often prove to be better to do this than to have a company car. The company can also reclaim vat on the fuel element of this payment.
How We Can Help You
We can assist you with tax planning advice in relation to your company car. Please contact use for further advice.
Got a Question?
If you have any queries on any of the above, please ask a question
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