Own car v company car

By Tolley

The following Employment Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Own car v company car
  • Should the employer provide a company car or should the employee use own car for business travel?
  • Cost to the employer
  • Pool cars

Should the employer provide a company car or should the employee use own car for business travel?

In deciding whether to offer employees a company car as a standard benefit, or in structuring and costing a flexible benefit scheme (see the Flexible benefits schemes ― an overview guidance note), the employer may well need to know in advance how likely it is that the offer of a car will be taken up or whether an alternative should be offered. In addition, now with the OpRA rules (see the Optional remuneration arrangements), the calculation will need to take account of the correct value to be taxed where an option is given to the employee.

The answer to this question is complex and depends on a wide variety of factors. Whilst to some extent it is a matter of the employee’s personal choice, the employer can influence the decision when designing the company car offer or flexible benefits scheme by taking into account the tax and other factors that will be important to the employee in making his decision.

The following issues will affect the attractiveness of the offer:

  • to what extent will the employee have a choice of car? Will they have a wide choice or will they be restricted to fleet vehicles or particular makes / models or a particular car?
  • what else will be included? Typical arrangements include such items as insurance, breakdown cover and windscreen replacement
  • what is the CO2 emissions level of the car, or will the employee be able to influence the car that they receive and the CO2 emissions that it has?
  • who will provide fuel for the car ― the employer or the employee?
  • what will the effect of offering a

More on Flexible benefits: