Car Allowance or Company car

Steve_Holl · 9 November 2009 at 2:05PM

I'm sure there are plenty of posts on this!

I recieve £4000 / yr car allowance
£0.20 / business mile
High tax payer also.

I travel 20000 personal miles and 12000 business miles / year.

I've asked for an increase of car allowance or a all expensed company car.
I have been offered use of a pool car for business miles and I would still keep my car allowance.

Does this sound like a good deal.

Steve

Rolo_Tomasi · 9 November 2009 at 5:08PM

Your income will reduce by £3240 (12000 miles at 20ppm tax relief at 40% on £2100) however you will be using you own car less so, theortically your fuel bills, repairs, depreciation etc will all fall.

You need to work out how much your car costs to run to see if you are better off.

You should note that a pool car cannot go home with you - it has to be parked at your companies premises overnight so you would still need your car to travel to your company to pick up the pool car. At the end of the day you have to return the pool car to your company and then travel home in your own car. Does this sound practical?

TM1976 · 9 November 2009 at 8:19PM

As Rolo says in order for you not to get taxed on the benefit of providing a car you need to be able to prove that you have absolutely no private use of it. This is almost impossible and you are likely to get taxed on it anyway, at 40%.

Unless you are going to get rid of your own car it's definately not worth it as you will still have to pay a lot of the standing costs of having a car such as tax, insurance etc.

Debt_Free_Chick · 9 November 2009 at 11:05PM

TM1976 wrote: »

As Rolo says in order for you not to get taxed on the benefit of providing a car you need to be able to prove that you have absolutely no private use of it.

I don't wish to be picky just for the sake of it, but "the test" is actually much more strict. You have to be able to demonstrate that the Company Car is not made available to you for private use i.e. that it's effectively taken away from you at the end of the working day. If the car is available to you, then you are taxed on it for personal use, even if you opt not to use it personally.

It's for this reason that having use of a company car results in a personal tax charge 99.99% of the time .... because it's available for personal use, whether you use it or not!

td_007 · 9 November 2009 at 11:14PM

Steve_Holl wrote: »

I've asked for an increase of car allowance or a all expensed company car.
I have been offered use of a pool car for business miles and I would still keep my car allowance.
Does this sound like a good deal.
Steve

This is rather unusual that your company allows an allowance plus the use of pool car. Normally it is one or other. However, if it is a "true" pool car (see here) then it means less wear and tear of your personal car and also no tax liability on using the pool car (you will be taxed on the allowance as normal). Make sure you clarify that your company will pay insurance/repairs/breakdown cover etc. of the pool car.

TM1976 · 10 November 2009 at 12:08AM

It's almost impossible to avoid the being assessed as having a benefit, sorry I didn't make this clear.

I'm not sure here whether the OP knows he'll be taxed on it but still thinks it's a good deal as he actually wanted a fully expensed car anyway. If he actually does use it for personal use it's not such a bad deal as he still gets his car allowance.

Steve_Holl · 10 November 2009 at 10:08AM

I originally asked for an increase in my car allowance, but have had this option of a pool car put to me ( may be forced on me!).

My main concern is that it I travel 40 miles to work, and for alot of my business trips it is an indirect route to go via work. Therefore I would take the pool car home at night, then have it at home the next night. I make approximately 1 long distance business trip a week, so the pool car would be at home 2 nights per week. If I then creep in the bracket of being taxed on it, I might as well have the car totally and get rid of my own.

I'm concerned that by asking for an increase in car allowance, I may have shot myself in the foot with this option being put to me.

The car being discussed is a Toyota Prius, so the tax liability would not be too bad if i had it as a company car. I could pay for fuel myself and claim back the business miles at £0.13 (as per HMRC guidance) ??

Finally the real bug bear is that my Director would also share the pool car, so straight away I see conflicts of who can have the car when???

Rolo_Tomasi · 10 November 2009 at 10:41AM

Under the circumstances described it would not be classed as a pool car - you would pay company car tax on this vehicle but only for the days it is available to you so there would need to be accurate record keeping of this. The tax is based on the CO2 emmissions and list price of the car so, as you have said, it wouldn't amount to much - especially if you pay for your own fuel.

I do not think it is a bad propsect as you are keeping the £4kpa car allowance but also having use of a company car - but you would be losing out on the mileage payments (and extra tax relief on these) that you are currently getting.

Steve_Holl · 10 November 2009 at 11:02AM

I must admit, loosing the mileage payments does worry me as it does add up to a fair amount.

But I would not have to worry about buying a new vehicle in the future.

I may ask that, rather than have a car allowance, that I have the Toyota as a company vehicle and i pay all fuel, claiming back business miles at the HMRC rate (£0.12)

TM1976 · 10 November 2009 at 7:04PM

Rolo_Tomasi wrote: »

Your income will reduce by £3240 (12000 miles at 20ppm tax relief at 40% on £2100) however you will be using you own car less so, theortically your fuel bills, repairs, depreciation etc will all fall.

I'm not sure if you got this from Rolo's post but on your current situation you can claim tax relief of £2,100 per year on your business miles because you are paid at lower than HMR&C's AMAP rates of 40p/25p per mile.

You would be assessed as having a company car but technically you could pro-rate the benefit as it is not available to you all the time on account of it being available to your director.

TM1976 · 10 November 2009 at 7:09PM

Might actually be a better option to keep the current arrangement, instead of getting your fuel paid get the company to pay for 100% of your fuel, as you do 20,000 personal miles a year this is worth quite a lot to you.

You would then still be able to claim tax relief, only you would get relief on the full 40p rather than the 20p.

Car Allowance or Company car

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