It is frankly astounding how many acronyms we have to describe an alternative to a company car…… but let’s be honest, forget ECO, SECOP, PCH, CSA, MCA, Landed Cost, Cash option, etc, etc; there are really just two that matter, it’s either a company car, or it’s not.
With company car tax rates for cars with traditional drive-trains having risen again from April for new registrations (due to the new WLTP rules), we’re seeing more enquiries about possible alternatives. But this is a confusing area and all these different terms don’t help.
At its most simplest, it’s possible to say that there are only two options; a company car and a private one. With the former you pay income tax based upon a scale charge which is determined by a percentage based upon the car’s CO2 emissions and List Price. If the car emits more than (say) 100g/km of CO2 (which almost all ICE cars now do) it’s going to be a big number.
With a private car you need to consider the employee’s cost of owning, or leasing the car, and running costs. To the extent that the employer pays the employee any cash to fund those costs there may be tax and NIC to pay. Offsetting this you can reimburse business mileage at up to 45p a mile (and get CT relief!). And even if you don’t, the employee can still get tax relief for the difference.
The acronyms above all relate to different ways of the employee getting their private car. Different approaches work in different circumstances, but the bottom line is that a private car doesn’t attract income tax or class 1A, but whatever you pay the employee towards running the car may do.
Where you need to be careful is any private car that looks a little bit too much like a company car. This is where advice should be taken in order to avoid any risk that HMRC might argue you should have been paying company car tax and NIC (as might be the case, for instance, with PCH if there are corporate discounts)
If you’d like to know more we’re hosting a webinar on Wednesday 3rd June at 10am; “the future of company cars; the definitive view”.
Register in advance for this webinar: Click Here to Register
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