We have identified an ideal employee for our small business who will have management responsibility. Only trouble is that he lives 75 miles away, so will have a 150 mile daily commute which he is fine with.
He has asked us to buy a company car for this (it can also be used for business travel, which will be negligible mileage).
He will pay insurance, MOT and servicing/repairs. We split the fuel costs 50/50 with him.
We will have to pay £600 extra NI (due to BIK), plus the car will depreciate heavily in value due to 35,000 miles commuting a year - which we are ok with as we are buying second hand.
The bigger problem is that the guy's salary will be around £40k per annum: so with a £5k benefit in kind on the car (based on original list price and CO2 emissions), plus fuel benefit of nearly £5k again (based on CO2 emissions), this will cost him an extra £3k in tax he simply can't afford. Which as a PAYE employee I presume will need to be deducted at source?
So - can we instead make an interest-free loan to him upto 10k, to go and buy the car himself? Issues there are 1) how can we write off/release the loan so that he doesn't have to pay it back, and 2) the fuel contribution issue for non-business use (commuting) will still exist.
Thanks in advance for any advice you can give!