Because Her Majesty’s Revenue & Customs considers a company car to be a benefit-in-kind, providing vehicles to your employees is not a decision to be taken lightly.
Any employee who earns over £8,500 a year and is given a company car, which they (or a member of their family) use privately, will have to pay a tax charge. As the employer you must deduct the tax from the employee’s wages on a Pay As You Earn basis.
The amount of tax due is calculated on the value of the vehicle to the employee, how much it would cost to buy the car outright and the type of fuel it uses. Whether or not the car is used part-time, or whether or not the employee pays something towards the cost of the car, also affect the amount of tax payable. If the employer pays for fuel which is used by the employee on personal journeys, that benefit will also be taxed. It is even possible that an unexpected tax charge can arise if an employee only makes occasional use of a car that’s available to other employees.
With the tax on benefits in kind increasing all the time, your employees may not feel a company car represents any kind of benefit at all. Our tax advisors can help you with this type of strategic decision. If you do decide to provide cars to your employees you can leave to us to deal with the tax ramifications.
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