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Confused over providing a company car

We are a small start up company hiring a new salesman who needs a vehicle. We are considering the options, but likely  the comapny will lease or hire a vehicle for him to use mostly for work, but some private use.  I'm struggling to understand how the process works.

The employee pays for petrol some of which is for private use. As I understand if the company repays everything he would be hit for an addiitonal P11D charge for the provission of private fuel use.  Since most of his miles will be business I expect this won't be tax efficient. So if we don't pay all of the petrol cost I understand we can repay at up to the advisory fuel rate of say 15p/mile on whatever is documented as business use.  I understand this is free of any tax implication for the employee.

If the above is correct what happens to VAT?  The employee has paid VAT on the fuel purchase so can we claim back VAT on the 15p we pay to him i.e. 2.5p?

I'm assumnig the Fuel Scale Charges I have come across only apply where the company pays all of the fuel costs and therefore where the employee is taking the P11D hit for fuel provision i.e. this is not relevant in this case.

Thanks for any clarification.

Mike

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By masplin
10th May 2012 18:28

So does the 15p advisory fuel rate consist of something other than fuel or is this implying 2.5p per mile can ber put on the VAT return?

 

Thanks

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Yes

The advisory fuel rates are fuel only, so in your example, you can reclaim 2.5p VAT per mile, assuming the employee will give you sufficient VAT receipts for fuel to cover the business miles travelled.

There are other ways of doing it (eg company fuel card with employee reimbursing for private mileage at the advisory rates), but what you're suggesting is by far the simplest method for a small business.

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By masplin
11th May 2012 09:12

perfect thanks

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11th May 2012 09:33

Company Cars

If you must go down the company car route, then consider supplying a low emmision car. This has advantages to the company - 100% First Year Allowance, Reduced Road Tax and the employee in the form of reduced Benefit In Kind Charges.

The trick is getting the employee to drive one.

  

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16th May 2012 10:54

Practical point

YOu mention you are considering  so can i suggest that you hire a car of the size and type you propose buying or leasing for a few months.  This will make sure that you do want a saleman and that the one you takeon is right for you.

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By masplin
16th May 2012 11:26

That is what we have decided as the extra cost short term is worth the flexibilty. Thnask fr the advice.

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By masplin
25th May 2012 12:42

Boss has intervened

In typical fashion the boss has intervened and got him a fuel card without my knowledge!!!   As i understand it if we pay all his fuel he wil lget hit for a substnatial additonal benefit in kind charge. To avoid this presumably we work out the monthly business mileage multiple by the fuel alowance and then he owes us the rest. Question is how do we get him to repay us?  Is it a deduction taken off his net pay by our payroll people?

 

Thanks

 

Mike

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