Let’s be clear about Pool Cars!
Several clients have asked us about purchasing cars (includes Vans) to be used as pool cars.
There are criteria surrounding the use of pool cars to make sure the no benefit in kind (and therefore income tax and national insurance) is assessed on an individual who has use of a pool car.
If you fail to meet the criteria, then an individual may assess as having private use of the car and as such be taxed according. The company owning the car will also be assessed for Class 1b National Insurance which is currently 13.8% of the benefit in kind provided.
A summary of the criteria to satisfy HMRC that a car is indeed a Pool Car is set out below:
(a) It’s available to, and actually used by, more than one employee.
(b) It’s made available, in the case of each of those employees, by reason of their employment.
(c) It is not ordinarily used by one of them to the exclusion of the others.
(d) Any private use by an employee is merely incidental (see below) to their business use of it.
(e) It is not normally kept overnight on or near the residence of any of the employees unless it’s kept on premises occupied by the provider of the car.
The expression ‘merely incidental to’ imposes a qualitative rather than a quantitative test. The use of a car for what is primarily a business journey but embracing some limited private use would be within the terms of (d) above. A simple example might be where an employee who needs to undertake a long business journey is allowed to take a pool car home the previous night in readiness for an early morning start.
Employers need to be able to demonstrate that the conditions for the car or van to be a pool vehicle have been met
Examples of how to do this are:
- Keeping mileage records to show when the car was used, by whom and for what Journeys.
- Reconciliation of the above mileage from MOT to MOT or service to service
- Insurance that excludes Social, domestic and pleasure
- Employment contracts to say a car is nor available for private use
- Employees should have another car available for personal use
If you need any further help or advice on the use of pool cars (Vans) please get in touch