big headache providing car for new employee

Prospective employee wants us to buy him a car for his commute (due to very long distance commute)

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Hi all,

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!

Replies (9)

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By Duggimon
19th Jun 2017 11:55

You would save everyone a lot of trouble by just paying him more so he can afford his own car and petrol. That is effectively how the tax position will end up anyway.

I wouldn't advise anyone to buy company cars for employees who will have near 100% personal use.

As for your 'loan', if he's not paying it back it's not a loan.

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By Mr_awol
19th Jun 2017 11:55

Re-locate the business closer to his home

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Replying to Mr_awol:
By Duggimon
19th Jun 2017 11:55

I rescind my answer, this is the best option.

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By Bacc
19th Jun 2017 11:58

Pay him an additional "car allowance" - and then pay him for any business miles that he does.

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By kiwilondon99
19th Jun 2017 15:36

don't buy lease or HP the car - via the Company, nor act as guarantor
he will get fed up with commuting like this - and leave - in which case you have an asset you can do nothing with !!
presumably he will be on 3 month trial or 6 anyway

if you end up paying him 5k/6k/10k pa allowance etc [ plus your Co NI..] he can go get/lease what he likes, [ensure not a motorbike ] and you can pay ONLY business miles reimbursement. if he walks in due course, you have ended all contractual commitments

experience shows - that unless he is to be really field based - and not Office for a high % it will not last Good luck

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By andy.partridge
19th Jun 2017 15:49

You say you have identified the ideal employee? Has this person identified you as the ideal employer? I doubt it simply on the basis of the commute which could add 3-4 hours on to their 'working day' everyday.

It would be a mistake to invest heavily in this person on day 1. There is a huge risk that they will leave as soon as they can find something closer to home. Think about it. They aren't really quite so ideal after all.

You can try all ways to make it work financially, but unless you are paying way over market rate you will not be solving the real problem.

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By thewireone
21st Jun 2017 14:34

Thanks all. The trouble with car allowance is that (unless it is a very large one) then it will not give him enough cash to buy a car outright plus he will be taxed on it, mostly at 40%.

I'm thinking buy the car outright in the company name but if he quits due to the strain of travelling, the car can just be sold (unless we decide to keep it for small business runs/errands anyway, we are buying something second hand)

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Replying to thewireone:
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By ms998
21st Jun 2017 14:37

Employee could get a person loan to be paid back with the car allowance.

Plucking figures from air:
Company costs

Car £20k
Fuel £2,500 per year
NI on Benefits as they stand £300 per year

For this amount you could give a car allowance of over £5,000 per annum and not be lumbered with the car issue.

Employee can finance their own leased car for £250 a month?

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By mrme89
21st Jun 2017 15:13

How effective is this perfect employee going to be in the workplace with all this travelling?

How safe is this employee going to be after travelling 75 miles to get to work, putting in a full day, and then driving 75 miles back on a regular basis?

It may well work out in the short term, but I cannot see the employment lasting. The distance will eventually take strain on their health and home life, and then they’ll look for another job.

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