When does a company car qualify as a ‘pool car’?

If your company buys or leases a car and makes it available to a specific member of staff, and if that employee then uses the car for any amount of personal use, however small, they will be taxed on the benefit in kind, in full for the tax year. For petrol and diesel cars, this will be expensive for them (and for your company, which has to pick up the class 1A national insurance bill on the benefit).

 

But what if one person alone doesn’t have exclusive use of the car? Could the vehicle be treated as a ‘pool car’ – in which case nobody suffers a personal tax liability on it and your company saves on the national insurance? Well, here are the qualifying conditions for a company car to be deemed a pool car.

 

  1. The car must be made available to, and actually used by, more than one employee.

 

  1. The car must be made available to each employee who used it as a result of his or her employment.

 

  1. The car must not be ordinarily used by one of the employees to the exclusion of the others. Any private use of the pool car by an employee must be merely incidental to the employee’s business use of the car. From HMRC’s point of view, incidental private use would include things like taking the car home one evening because the employee is leaving for a business trip the next morning. Taking the car home and then using it to go shopping at the weekend or visit family will not be incidental private use and will risk the ‘pool status’ of the car.

 

  1. The car must not normally be kept overnight on, or even close to any of the employees’ homes. HMRC’s take on the `not normally’ condition is that it’s met if the car is taken home by employees on fewer than 60% of nights; they do not consider why the car was taken home, just the percentage (frequency).

 

Could your company qualify for a pool car? If you think it could, let us know and we will advise on the best way of buying or leasing it for you.

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David Elliott
David Elliott

Chartered Accountant, BSC, FCA

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