Company cars
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Some companies will make a car available to an employee, this benefit of a company car will mean that the employee will have an additional tax charge to pay on the benefit in kind. If in addition free fuel is provided for private use, then there will be a further tax charge. An employer who provides the company car will also be liable to pay Class 1A NICs on these benefits.
On rare occasions the provider of the car is not the employer, in some instances this may still mean that there would be a tax charge to pay. If employees use their own vehicles for work, they may be eligable for some tax relief (or NICs) due but it would all depend on any allowances paid for business travel.
Company Car
If you have a business it may be that the use of company cars would benefit your business. It could be that you have sales people who travel around the country, your cars may be used to get to meetings with customers or for transportation of goods. You can choose to buy or lease company cars.
Employee's Company Car
Employees that have jobs that require alot of traveling, ie salesman often have the benefit of a company car, some companies will offer the use of a company car to their employees as an additional motivating influence, they hope it will help their employees to be punctual and more reliable. A compny car can help an employee feel valued in the work place. The cost of running and buying a car is no longer an issue for them so they can concentrate on doing their job more efficiently. You have to consider when providing an employee with a company car, what kind of impression you want potential customers to have, a well cared for new car will create a better impression than an old rusty one.
Cost of Company Cars
Leasing or buying a car can be a cheap long term option and it will work out cheaper than the cost of several rental or hire car charges. The car can be used at any time by the employee, either for business or personal journeys. You can pay for a car monthly, and the actuall cost will obviously depend on the model. If however yu choose to buy a car outright, you amy be able to negotiate discounts if you agree a contract with a manufacturer. They may grant you a discount for buying several cars.
Purchasing
If you buy a car out right then the car is yours to do with as you wish. If needs be you could choose to sell it if you find you need the funds. Some companies give their employee the choice to buy the car. Owning the car means you are responsible for all extra costs associated with it. Tax, insurance and maintenance costs will have to be paid for by you the owner.
Hiring and Leasing
Hiring or leasing a car over a number of years has advantages and disadvantages. An advantage is the monthly payments will be alot less than if the car was bought out right. Maintenance and insurance costs can often be covered in the leasing costs.
The employee will also feel the benefit as they will pay little or no tax.
Although costs are lower, you will not own the car. At the end of the lease time though, it will be easy to trade in for a new or better model.
Taxation on Company Cars
Tax is usually charged on the retail price of a company car. Fuel and emission efficiency is also taken into account, environmentally friendly cars will cost less. Diesel cars may be subject to a small additional tax.
If a company pays for some or all of an employee’s private fuel then you will be liable for a separate Fuel Scale Charge which is a fixed charge dependent upon the engine size of the car, and whether it is petrol or diesel.
An employee is required to pay Class 1A National Insurance Contributions on company car and fuel benefits; this cost can be kept low if the car is efficient and enviromentally less polluting.
