What Is Company Car?
A company car is a vehicle provided by an employer or business to an employee for use in their job. Employers can generally provide company cars in either cash, salary sacrifice, or a special rental agreement, with the purpose of allowing a worker to carry out their duties. Employees that often get company vehicles usually drive a specific type of car to certain destinations. The cars are typically owned and leased out by the employer. There are also other types of company cars that are provided to certain employees, such as luxury cars and rental cars.
Types Of Company Car Usage
When owning a company car, there are typically two types of usage: business and personal. Business use of a company car typically includes transporting clients, sales and administrative duties, attending business meetings and conferences, and day-to-day client visits. On the other hand, personal use of company cars typically includes using the vehicle for leisure purposes, such as taking a weekend outing, or running errands.
Permission To Use For Personal Use
It is important to understand that permission must typically be granted by employers before using the company car for personal use. Companies may allow personal use of the company car provided that employees are not taking it out of the local area, or any other restriction stipulated by the employer. However, many employers will not allow personal use of the company car unless there is a reason related to business use.
Tax Implications Of Using Company Car For Personal Use
Besides needing permission from the employer, one should also be aware of the possible tax implications of using a company car for personal use. If a company employee uses their company car for more than 50% personal use, the employee will be required to pay a “solicitors tax” at the end of the financial year. This “solicitors tax” is the amount imposed on the employee for the personal use of their company car. This can be quite a hefty amount, as it is calculated on the basis of the depreciated price of the car, the method used while maintaining it, and the fuel costs involved.
Pros & Cons Of Using Company Car For Personal Use
Using a company car for personal use can be advantageous for employees. For instance, it eliminates the need for owning a personal car, as well as maintaining it, and paying for fuel and repairs. Moreover, having a company car may make it easier to pursue professional networking opportunities. On the downside, one has to remember that the company car is owned by the employer, so its use is subject to the employer’s policies and regulations.
How Can The Employer Benefit From Company Car Usage?
Companies often consider providing a company car to their employees as a way of saving money. By providing a vehicle, employees no longer have to drive their own car, so it saves money on personal car expenses, such as maintenance, repair, and fuel costs. Additionally, employers often view having company cars as a reward and incentive for employees, or a way of demonstrating that they take care of their employees.
What Type Of Insurance Does An Individual Need Before Using Company Car?
Any individual who will be using a company car for personal use needs to secure the appropriate insurance coverage. This coverage typically includes liability coverage, collision coverage, and comprehensive coverage. Liability coverage will protect the individual driver from any damages incurred if they are in a collision and it is determined that the driver is at fault. Collision coverage will cover the cost of repairs if the company car is damaged in a collision, while comprehensive coverage will cover the cost of any other damages sustained by the vehicle.
How Can An Individual Track Mileage For Company Car?
When using a company car, it is important to track the mileage in order to correctly determine how much the individual driver will be taxed on the personal use of the company car. This can be done through various methods, such as installing a GPS tracking device in the vehicle or using software. Additionally, the individual should also keep track of any receipts related to the company car, such as fuel receipts or parking receipts, as these can be used as proof when filing taxes.
Are There Other Alternatives To Using Company Car For Personal Use?
There are other alternatives to using a company car for personal use, such as car sharing or carpooling. Car sharing services, such as Zipcar, allow individuals to rent a car for a short period of time. Carpooling is another cost-effective way to get around, as it allows individuals to share the cost of fuel and parking with other passengers. Both car sharing and carpooling are better alternatives to renting a car, as they can be much more cost-effective.
