Exempt company cars and fuel benefits
22 December 2022
Most employers and employees are aware of the additional costs of providing company cars and the tax implications they create. However, for many employees the attraction of having a company car means that in spite of any tax disadvantages, this remains a popular option. There are circumstances where it can be possible to offer employees car benefits that are exempt from tax.
Cars available for business journeys only
This rule has been the subject of much case law over the years, but it has generally been established that to qualify for VAT recovery the car must not be available for any private use.
This means that the car should only be available to staff during working hours for employment related duties or to travel to a temporary workplace. The business must also clearly tell their employees not to use the vehicle for private journeys and check that they do not.
Cars adapted for an employee with a disability
These cars are exempt if the only private use is for journeys between home and work and for travel to work-related training.
Fuel paid for by employees
The fuel benefit is removed when an employee pays for all their private fuel use or if the employer pays and the employee reimburses the amount (during the tax year).
Employers are not required to pay or report on 'pool' cars. These are cars that are shared by employees for business purposes only, and normally kept on the business premises. Employers must ensure the ‘pool’ car rules are observed.
Privately owned cars
Employers do not have to pay anything on cars that directors or employees own privately.
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