What Is A Company Car?
A company car is a vehicle provided to an employee as a form of remuneration for their services. They are popular as an employee benefit and are typically either leased, rented or owned by the employer, and given to the employee to use for business and pleasure. Company cars typically come with a variety of tax advantages and other benefits that can be attractive to employees.
Tax Implications And Liability
The taxation of company cars is based upon the value of the car, it’s running costs, and the type of fuel used. The tax treatment of company cars is based upon the taxable value of the car, as determined by the HMRC (Her Majesty’s Revenue & Customs). The taxable value of the car is calculated using a number of factors, including the list price of the car, the emissions of the car, the fuel type, and the working pattern of the individual. The tax is then calculated based upon the taxable value, and then the relevant taxes that apply to the car are applied.
Does A Company Car Count As Income?
Generally, a company car does not count as income for tax purposes. However, when the company car is used for private use, then there may be a chargeable benefit for the employee. This chargeable benefit is in the form of a desirable fringe benefit, and the employee must pay tax and national insurance contributions on this chargeable benefit.
The value of the chargeable benefit is worked out using the appropriate percentage applied to the list price of the car. This figure is then taken into account when calculating the employee’s income tax bill. In addition, the employee may also have to pay an amount into the company’s PAYE (Pay As You Earn) scheme to cover their national insurance contributions.
In terms of the tax implications, it is important to note that the chargeable benefit is based upon the list price of the car, and not the actual cost of the car. This means that any discounts or other savings that may have been negotiated by the employer are not taken into account when calculating the chargeable benefit.
What Are The Benefits And Disadvantages Of A Company Car?
There are numerous benefits and disadvantages of owning and using a company car. These include the following:
Advantages:
1. Tax Benefits – As noted above, the use of a company car brings with it tax advantages, as the chargeable benefit is based upon the list price of the car, and not the actual cost of the car.
2. Company Cars Are Cost-Effective – Company cars are often cheaper to buy and maintain than private cars, as the employer may have access to better discounts and deals.
3. No Worrying About Long-Term Commitments – With company cars, there is no need to worry about long-term commitment, such as loans or leases. Employees are handed the keys and can drive the car as long as they need to.
Disadvantages:
1. Loss Of Flexibility – Company car drivers may find that they can’t get from A to B as conveniently as if they were driving their own car.
2. Responsibility – Company cars come with responsibilities and obligations, including the requirement to maintain the car in good condition and ensuring that it is insured.
3. Payments – Employees may have to make payments towards the cost of the car, depending on the terms of the employer’s benefit package.
What Are The Financial Implications?
When it comes to the actual financial implications, a company car can be a financial burden. The cost of the car is taken into account in the benefits package that is offered to the employee, and the employee may be liable for the cost of the car and other running costs. Additionally, the employee may be liable for tax and national insurance contributions on the car’s chargeable benefit.
In terms of long-term financial implications, it is important to note that the employee is liable for any damage or repairs. Therefore, it is important that the employee takes out suitable insurance cover on the car. This cover should include cover for both damage and repairs.
The long-term financial implications of a company car can also be impacted by factors such as the duration of the use of the car, and the distance travelled. While the car may initially be free, the long-term costs of the car may add up quickly.
Final Considerations
When deciding on whether a company car is a suitable option, it is important to consider the benefits and disadvantages that it brings. Ultimately, it is important to weigh up the pros and cons of owning a company car, in order to make an informed decision.
It is also important to consider the financial implications of owning a company car, in order to ensure that the costs of running and maintaining the car can be met throughout the entire ownership period. Finally, it is important to be aware of the tax implications of owning a company car, and to ensure that any tax liabilities associated with the car are taken into account.
Company Car Financing & Insurance
When it comes to financing a company car, it is important to consider all available options. Many employers provide car loans for employees, although it is important to understand the repayment terms in order to ensure that the loan is affordable throughout the entire period.
It is also important to consider other financing options, such as leasing or renting. With leasing or renting, the vehicle may be owned by the leasing or renting company, instead of the employee. This can enable employees to benefit from the use of the car without having to bear the full costs of purchasing and maintaining it.
When it comes to insurance, it is important to ensure that the car is adequately insured against all risks. The insurance should cover both damage and repairs, in order to reduce the financial implications of any damage or repairs that may be required.
Company Car Options
When it comes to choosing a company car, there are a range of options available. Many employers provide access to a range of cars, from entry-level models through to luxury models. Employees are typically free to choose the model that best meets their needs, based upon criteria such as budget, usage, and overall requirements.
For employees who need to use a company car but don’t have access to a large budget, it is possible to opt for a second-hand or used car as a cost-effective option. This can be an attractive option for those who are looking to save money but still be able to access the benefits of using a company car.
Company Car Policies & Regulations
When using a company car, it is important to be aware of the relevant policies and regulations. Employers typically have a range of policies in place that apply to the use of company cars. These policies are typically aimed at ensuring that the car is used responsibly and that the employee adheres to the terms of the arrangement.
It is important to understand these policies and to ensure that the employee is compliant with them. Failure to adhere to these policies can result in disciplinary action or even the loss of the car. It is therefore important to ensure that the employee is aware of their responsibilities under the relevant policies and regulations.
Company Car Perks & Extras
The use of a company car can also bring with it certain perks and extras. These perks and extras can range from discounts on fuel and insurance premiums to discounted rates on maintenance services.
Many employers also offer additional perks, such as the provision of a personal driver, access to VIP car parks, and access to luxury car hire services. These types of extras can be highly attractive to employees, and can be a great way to reward employees for their loyalty and commitment.
Conclusion
A company car can be a great perk for employees, providing them with access to a vehicle for both business and pleasure. However, it is important to understand the implications of owning a company car, in order to ensure that the costs of running and maintaining the car can be met. It is also important to be aware of the tax implications of owning a company car, and to make sure that any taxes that may be due on the car’s chargeable benefit are taken into account. Finally, it is important to understand the policies and regulations that apply to the use of a company car, as failure to adhere to them can lead to disciplinary action or even the loss of the car.
