Own car v company car

Produced by Tolley
Own car v company car

The following Employment Tax guidance note Produced 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?
  • Personal circumstances
  • Personal preferences
  • Own car ― costs
  • The tax implications of the company car
  • Car fuel
  • The comparison
  • Cost to the employer
  • Pool cars

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

In deciding whether to offer employees acompany car as astandard benefit, or in structuring and costing aflexible 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 acar 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 awide variety of factors. Whilst to some extent it is amatter 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:

  1. to what extent will the employee have achoice of car? Will they have awide choice or will they be restricted to fleet vehicles or particular makes / models or aparticular car?

  2. what else will be included? Typical arrangements include such items as insurance, breakdown cover and windscreen replacement

  3. 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?

  4. who will provide fuel for the car ― the employer or the employee?

  5. what will the effect of offering achoice of car vs car allowance be on tax and NIC, and therefore overall costs?

In the case of an owner-managed business where the car is for an employed spouse, acontrolling director or his / her spouse, an important consideration

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