How companies can use a pooled car to save tax

If a company provides a pooled car to its employees provided all conditions are met, the pooled car is tax free. This means no benefit in kind arises and the costs of the car can be put through the company.

What is a pooled car?

A pooled car is a company car or van that is readily available for business use by a number of employees. No car or van benefit arises where all 5 conditions are met:

  1. it was made available to, and actually used by, more than one of those employees
  2. it was made available, in the case of each of those employees, by reason of the employee’s employment
  3. it was not ordinarily used by one of those employees to the exclusion of the others
  4. in the case of each of those employees, any private use of it made by the employee was merely incidental to the employee’s other use of it in that year.
  5. it was not normally kept overnight on or in the vicinity of any residential premises where any of the employees was residing, except while being kept overnight on premises occupied by the person making it available to them.

Meaning of not normally kept overnight

A car is not normally kept overnight at employees’ homes if the total number of nights on which it is taken home by employees, for whatever reason, is less than 60% of the total number of nights in the period under review. However, HMRC points out that this 60% limit is only a ‘rule of thumb’.

It adds the following caveats:

If a car or van is taken home often enough to approach the 60% limit, HMRC considers it unlikely that all of the home to work journeys will satisfy the ‘merely incidental’ test “4”.

Use of pooled cars by chauffeurs

A chauffeur who is normally employed to drive pooled cars is often obliged to take a pooled car home overnight. Although the travel between the chauffeur’s permanent workplace and home counts as private use you should not regard this as disqualifying the car from being treated as a pooled car.

Similarly the fact that the car is kept overnight at or near the chauffeur’s home need not be regarded as disqualifying it from ranking as a pooled car.

However, if the chauffeur is permitted to use the car privately at weekends or for holidays at any time during the tax year, the car will cease to qualify as a pooled car.

Inadequate parking facilities at company premises

An employer cannot argue that there are inadequate car parking facilities at the employer’s premises, or if the car or van were left overnight at the employer’s premises it might well be damaged by vandals, etc. Apart from the exception for chauffers, all 5 conditions must be met to qualify as a pooled car or van.

Practical Tips

To help companies evidence all five pool car conditions are met, the following should be considered:

  1. Have a written policy for employees on the use of the car, explicitly stating there is to be no private use.
  2. Keep a mileage log with details of journeys and their reason.
  3. Keep a record of any nights the car is kept an employee’s home and the reason why.
  4. Have the keys kept at the office.
  5. Keep evidence that your insurance covers more than one person to drive.

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