NEW Latest guidelines for HMRC Fuel Rates for company cars added for January 2009; still no change in the rates for use of a private vehicle (unchanged since 2002/3) but the mileage rates for fuel in a company car have dropped to reflect the drop in fuel costs over the last few months.
Some people like the idea of having a Company Car and having their business pay for a new car. Some even convince themselves that they need an upgrade to their existing motor so that the company creates the right image but, to be honest, who is going to watch you pull into the carpark everyday? If the person who recruits you and pays your invoices has nothing better to do than stare out of the window and make snap judgements on your abilities based on what car you drive, then I would not want to rely on them to get my invoices paid.
I am not actually against Company Cars, but they do not always make good sense. My accountant tried to get me to class my car as a Company Car without looking into the facts and when I presented some back of the envelope figures, they supported my decision not to do it. On the other hand, some accountants will try to get you to claim mileage rather than a Company Car as dealing with a Company Car will require more effort to set up and administrate.
Anyway, now we have dealt with the reasons for choosing a Company Car, let's get down to the facts.
This is very straight forward.
You can claim up to a fixed rate per mile (depending on the type of vehicle) for all business mileage travelled in your private vehicle.
|Kind of vehicle
|Car or van
Note (2nd February 2009) These figure still remain unchanged since 2002/3.
The accumulated miles are counted based on the financial year (not the company tax year).
There is no tax, national insurance or anything else to pay on this as long as the rates in the table above are not exceeded and you only claim for business travel.
These figures, along with a load of other information are available from the Inland Revenue web site.
You should note that if you are using your private vehicle for business travel (anything that you are claiming mileage allowance for, including commuting to work), you should inform your insurance company.
The first thing is that you should be aware of the time and effort of sorting out a Company Car and how much it will cost your company and you as an employee paying income tax and national insurance on the car as a benefit.
You need to know the value of the car (including accessories) and the CO2 emissions (this should be on the vehicle registration certificate). From these you should be able to work out the tax and national insurance you will have to pay on the car as an employee benefit. The CO2 emissions figure is used by the Inland Revenue to give a percentage which is multiplied by the value of the car to give the figure for the taxable value of the car as a benefit. See the Inland Revenue Company Car and Car Fuel Benefit Calculator for a rough idea on how this will affect you.
The next thing you need to decide is how is fuel going to be paid for. The options are:
Pay for all fuel yourself and then claim a mileage allowance for travel on company business (note that this is not at the same rate as for use of a personal car - see below for rates).
The company pays for all fuel and then you pay the company a mileage allowance for personal use (see below for maileage rates).
The company pays for all fuel (including personal travel) and you pay additional income tax / national insurance for this employee benefit (this is good if you do a lot of personal travel).
Are you following so far. Well here's the next bit...
If you are paying for fuel personally and claiming a mileage allowance for business use of the car or if the company is paying for all fuel and charging you mileage for personal use of the car then you again have some options; you can either use a set rate published by the Inland Revenue (see table below for the rates for 2007/8) or calculate the actual fuel cost/mile and use that.
You should note that if you are using the actual fuel cost/mile instead of the figures from the table, it is up to you to keep records and prove that the figures you use are accuarate for your car (fuel receipts and mileage records over a period of months).
The mileage rates for company cars published on the Inland Revenue web site listed below (the ones shown are from 1st January 2009 - these rates could change from one tax year to the next or on a significant change in fuel prices):
|1400cc or less
|1401cc to 2000cc
Whether you use the Inland Revenue figures or calculate your own will depend on whether you drive something economical or a gas-guzzler and whether you are claiming for mileage from your company or paying the company for personal use. Just remember that if you do not use the Inland Revenue figures, the ones you use could be challenged.
Now we have looked at the cost of having a company car to you, here are the bits the company can pay for instead of you:
- Cost of the car (whether paid in full or by a loan)
- Car servicing
- Car tax
- Car insurance (note that the policy must be in the company name)
- MOT once the car is over 3 years old
Finally, there are a couple of things you shold be aware of if you still want a company car:
- If you have car insurance in the name of the company, this may affect your personal insurance premium when you try to take out insurance on a private vehicle.
- If the company is paying for the car, then a VAT registered company cannot reclaim the VAT on the cost of the company car.
There are some tough sums to do if you want to work out whether a company car is financially worth it for you and your company. It is probably best if you put together a spreadsheet and work out the details. I will put together a template spreadsheet and post it here as a download if there is enough demand.