Having a company car to drive may sound like an amazing perk, but with it comes responsibility. Many employees assume that they can use their company car completely as they please, but they might be in for a surprise. Before you assume your next weekend with the company car is a sure bet, its important to understand the regulations and guidelines set out by both employers and the law.
The simple answer is no – company cars are to only be used for business purposes. Generally, both the employer and employees tax liabilities are impacted by use for personal trips. Employers are required to reimburse their employees for the cost of any private use of the car. The burden of taxation for using a company car for personal journeys lies with both the employer and employee.
It is important for employers to keep tabs on company cars and ensure the proper paperwork is in place to document all business related trips. Any company cars used for personal matters must be documented by the employee, and will include keeping detailed logs of all private journeys.
It is not always possible to avoid using a company car for personal use, and employers would typically allow one or two personal trips a year; however, it is important to make sure the parameters of personal use are established prior. Employers may offer to pay a fuel allowance to reimburse staff for costs related to their own personal use of the car, but this allowance needs to cover all costs, including those incurred by the employee. If the employee’s fuel allowance does not cover these costs, this would mean the employee would be classified as having a “benefit in kind” from their employer and income tax and NI contributions would be liable.
In addition, it is important for employers to ensure that the company’s business insurance covers the vehicle for any personal use. This is an important factor for employers, as if a claim arises for an event that occurred when the vehicle was being used for personal purposes, the insurance company might refuse to foot the repair or replacement bill.
Although concerns surrounding the misuse of company vehicles have been around for many years, the drivers of company cars now enjoy a greater degree of freedom relative to personal use than ever before. However, it is imperative that employers abide by the regulations, and respect the rules in order to avoid hefty fines and obligation to repay charges.
Employers need to know that they can trust their employees to be honest and truthful when it comes to the private use of a company car. Many employers end up in a difficult situation when an employee abuses their trust, and incurs fines and liabilities paid for by the employer. All in all, it is important for employers to put the necessary policies and procedures in place to ensure the responsible use of a company car.
The current system of taxing company cars is designed to ensure that employers and employees pay the correct taxes for journeys taken for personal use, and penalties are enforced for those who fail to abide by the regulations. Employers need to be aware that they can be liable for any penalties or taxes, so in order to ensure their costs remain low and to avoid any negative implications for their business, it is important for all parties to keep track of the use of all company cars.
Failing to observe the rules can often have financial implications for employers, so they should ensure they are up to date with the latest rules. It is important that all employees are aware of the use of the company car and the related implications. Employers must ensure that all their staff are trained on the guidelines and processes regarding the personal use of a company car.
Keep a Log
One of the easiest and most efficient methods for monitoring personal use of a company car is for employers to have an approved logbook system in place. This provides employers with an accurate record of all journeys taken, and can help them know if an employee has exceeded the permitted level of personal use. Employers may also require their staff to submit their mileage reports on a regular basis in order to avoid any unnecessary complications.
Ultimately, company cars are a great way to provide employees with an efficient means of transportation while at work, but it is important to understand and abide by the rules associated with it. Companies need to ensure that they have proper systems in place to monitor the personal use of their company cars to ensure that all taxes, levies and tarrifs are paid accordingly and possible penalties are avoided.
By knowing the rules, businesses and employees can protect their own financial interests. Furthermore, company cars generally require a greater number of services and maintenance compared to a personal vehicle, and this adds to the financial burden for employers. A final expense for employers to consider is that of the initial cost of renting or purchasing the company car in the first place.
Employers may provide their employees a company car as part of their package, but they must ensure they abide by the regulations. Generally, company cars should only be used for business purposes, and taking it for private trips should be done with caution. Many employers are now turning to technology to monitor the use of their company cars and the related costs, so they can stay on top of any potential liabilities.
Having a clear policy in place surrounding the personal use of a company car is essential for employers and businesses. This will also ensure that employees understand their duties and adheres to the company policy. Furthermore, employers should make sure that they are up to date with the latest tax regulations and ensure that their staff are aware of all relevant policies and procedures.
Maintaining the Vehicle
Employers should invest the necessary resources into maintaining their company car, not just for the purpose of providing their employees with a safe and reliable vehicle, but also in order to protect their own financial investment. Servicing a company car on a regular basis will help to avoid any costly repairs, and failing to do so could lead to hefty repair bills, as well as putting the lives of their employees at risk.
In conclusion, there are countless factors to consider when it comes to allocating a company car to an employee, but the underlying message is clear – the use of a company car should be limited to business purposes only. Employers should be aware of their responsibilities with regards to their company car and the related liabilities, and they must ensure they are up to date with the latest regulations. By adhering to the rules and regulations, both employers and employees will benefit from a healthy and successful business relationship.
Having a policy in place to outline the conditions and guidelines for using a company car for personal purposes is essential for employers. Employers must ensure the policy is both detailed and clear so that their employees understand their requirement, and can ensure they abide by all laws and regulations. Employers can also use this policy as a means of protecting their own interests. By establishing clear rules and agreements for employees using a company car for personal use, employers can significantly reduce the risk of unexpected expenses.
Overall, employers should ensure that their company cars are used in accordance with the rules and regulations, or else they may be liable for any Penalties incurred. Leaders should communicate the policies and protocols to their staff, and make sure that their decisions are compliant with the law. Additionally, regular checks should be undertaken to ensure that the company car is in a safe, roadworthy condition and any maintenance expenses should be budgeted for.
In addition to personal use, employers must also be aware of the implications that overtime may have on the use of a company car. Many organisations are introducing stringent policies on the use of company cars during overtime, as they consider it as an ‘allowance’ or ‘benefit in kind’ and therefore should attract taxation. Employers should ensure that any overtime journeys are carefully logged to ensure clarity and accuracy.
Motoring costs for employees using the company car for business purposes can be considerable, and it is the employer’s responsibility to reimburse these expenses. As such, employers should ensure they calculate their employee’s travelling costs and reimburse them accordingly. Employers should also take into consideration the location of their employees and the necessary accommodation costs they may incur.
Employers must ensure they communicate clearly the use of company cars, the ethics surrounding it and that all company cars are properly insured. Furthermore, it is essential to ensure that the terms and conditions are clear and agree between the employer and employee. Employers need to be aware that using a company car for personal use can involve significant tax liability, and as such, policies and systems need to be implemented to ensure compliance with all relevant laws and regulations.