Where an employer provides an employee with a car for their personal use, it is a taxable benefit, which results in income tax payable by the employee and Employer’s National Insurance Contributions payable by the employer.

A car is not considered to be available for private use if it’s a ‘pooled car’.

Where a car used by employees is regarded as a ‘pool car’ there is no benefit in kind and therefore no income tax or NIC payable.

A car only qualifies as a pooled car if all of the following conditions are satisfied:

• It’s available to, and actually used by, more than one employee.
• It’s made available, in the case of each of those employees, by reason of their employment.
• It is not ordinarily used by one of them to the exclusion of others.
• Any private use by an employee is merely incidental to their business use of it.
• It is not normally kept overnight at or near the residence of any of the employees unless it’s kept on premises occupied by the provider of the car.

Employers need to be able to demonstrate to HMRC that the conditions for the car to be a pool vehicle have been met, for instance, keeping mileage records to show when the car was used, by whom, and for what journeys, and records to show where the vehicle has been parked.

The car must be kept overnight at a business trading address or a nearby car park, but it must not be  parked at or near an employee or director’s address, unless the incidence of taking the car home is strictly necessary to start an early business journey the next day.

To claim that a car is a ‘pooled’ vehicle, it is advisable to:

Maintain a log of all use of the car and all its journey’s, such as a mileage logbook, destinations, the purpose for the use of the car, and the names of the drivers.

Have a clear written policy (and adhere strictly to it) stating that the car is for business use only.

Have a clear system for the car keys to be locked away at the business premises overnight and signed in and out where that car is being used by employees.

If you would like any more information about this or any tax issue please contact one of our tax team on 0141-332-6331.

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Take care until the next time

Russell + Russell