For the company · All of the car running costs can be paid for by the company and all these costs are eligible for corporation tax relief. · The motor documentation, including the motor insurance must be in the name of the company. · A form P11d needs to be filed with HMRC each year to report the taxable benefit-in-kind on the employee who has use of the car. · The company can pay for all of the fuel, but this will lead to an additional taxable benefit-in-kind on the employee (called the fuel benefit) · The company will pay Class 1a national insurance contributions on the value of all benefits-in-kind. For the Employee · HMRC will treat private use of the car as a company car taxable benefit-in-kind which means that extra tax will be paid by the employee. · Private use includes the travel from home to work. There will usually always be some private use of a company car. · The value of the company car taxable benefit-in-kind is calculated as a percentage of the list price, the percentage is based on the CO2 emissions and whether the car is petrol or diesel. · The list price of the car is the price when first registered, not necessarily the price paid. · If the company pays for all of the fuel, then an additional P11d benefit-in-kind will arise (called the fuel benefit). This is calculated using the same percentage as calculated above, multiplied by a fixed figure which changes each year (2018/2019 the fixed figure is £23,400). · The employee can pay for all of the fuel and charge the company for business mileage, the charge is based on the engine size. This would avoid the fuel benefit arsing. · Alternatively, the employee can reimburse the company for all private fuel, the amount is based on engine size. This will also avoid the fuel benefit arising. · The value of these benefits is treated like extra earnings and is added onto the employee’s current salary in order to calculate the extra tax. There will be no extra national insurance payable for the employee. The Basic Rules · The higher the list price and the CO2 emissions of a car, the higher the tax payable by the employee and the higher the Class 1a national insurance paid by the company. · Depending on the type of car, it may be cheaper for both the employer and the employee if the employee is simply given extra salary to purchase their own car, and the charge the company for business mileage. · You can check out what the company car and fuel benefit charges will be by using the HMRC online calculator - https://www.gov.uk/calculate-tax-on-company-cars. This gives the amount added to the employee’s earnings in order to calculate the extra tax (for the employee), and Class 1a national insurance (for the employer) · Different rules apply for vans and commercial vehicles. · There are tax advantages for electric and hybrid cars, the details which are not covered here. We hope you find this factsheet helpful. These are the basic rules, if you need further advice please call us for a one to one meeting.
Company Car Implications
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