A company car used by a director or employees potentially a taxable perk, even where it’s only used for business. The tax charge arises where the car is “available” for private use. Actual use is less important. Therefore, the first step to avoid a tax charge is to communicate that t’s not available for private journeys, which includes commuting between home and the normal workplace.
Further, the car must:
- be available and used by more than one employee
- not usually be driven by one employee to the exclusion of any other
- not be used for private journeys unless they are incidental to the business use
- not normally be kept overnight at or near to a director’s or employee’s home.
While the conditions for a car to count as a pool vehicle are tough, they are achievable. In practice the trouble is that it’s not enough to just meet the conditions, you must be able to show that they are been met.
There are two situations where private use of a pool car is allowed and they are:
- takes the car home overnight solely so they can get an early start for a business journey the next day;
- where private use of the car is incidental to a journey which is made in the course of their job, for example a surveyor is visiting a customer and does some sightseeing in the local area (without extending his journey).
So what can you do?
- Have a pool car agreement, this can be a part of your company’s staff handbook or a separate document – this helps demonstrate the “no available for private use” requirement
- Keep scrupulous records so as not to give HMRC a reason to suspect that a car is used for private mileage.