Business motoring - drive down your tax bill

Seize the Day - Time to Consider!

The company car can be an important part of the remuneration package for many employees - and a crucial business tool for employers. However, tax, VAT and national insurance costs could mean that the company car is not the most tax-efficient option for either employer or employee.

The car benefit and car fuel benefit (where fuel for private use is provided with the car), on which you pay income tax at up to 45%, is calculated at up to 37% of the list price (car) and the same percentage on a notional £22,100 (fuel).

Furthermore, VAT incurred on a ‘motor car’ generally cannot be recovered. There is some scope to recover up to 50% VAT incurred on a finance lease for a motor car used at least in part for business purposes, but for organisations which cannot recover all of the VAT they incur, the VAT recovery position will be lower.

It’s not all bad news, though. Certain motoring costs such as parking, fuel and maintenance can be recovered, subject to certain conditions.

It may well be worth conducting a complete review of your company car and employee motoring policy, firstly as it could prove more beneficial to pay employees for business mileage in their own vehicles at the statutory mileage rates, especially if their business mileage is high, and secondly, to ensure that the business is recovering all of the VAT it is entitled to.

We can help you decide on the most efficient way to organise your business motoring.

Registered to carry on audit work in the UK and Ireland by the Institute of Chartered Accountants in England and Wales and authorised and regulated by the Financial Conduct Authority for investment business