The current cost/benefit equation

One thing that the group might be useful for is to gather together information and advice on company cars that we can compile for the benefit of other AccountingWEB members.

While reviewing recent articles and queries on the subject, I noticed recent comments that may have tilted the balance slightly away from company cars (from the employee's perspective). Would members of the group like to get things rolling by offering their summary of the current situation?

 

Comments
Old Greying Accountant's picture

Depends ...

Old Greying Acc... | | Permalink

If it is purely a perk car, and it needs to be financed, my opinion is that a company car is usually the best option, especially as rates are often cheaper for a business, and some deals are only open to businesses.

If there is a high business mileage element, then it may be best to own privately and charge back mileage allowance.

I think though these days you have to get them to pick the car they want and then do the math to see which comes out best.

The above all relate to owner/managers, obviously for an employee it is a different matter as you have to balance two separate interests and is therefore more complex.

nigel's picture

All comes down to cash

nigel | | Permalink

It would be nice to think we call carry out a cost/benefit calculation when advising clients, but it usually turns on more intangible factors.

As an employee I would go for a company car every time, provided I can choose my own car to get the best ratio of cost to CO2 emissions. I don't have a trade-in or the cash to put down a deposit, so getting the firm to buy the car makes sense to me, plus I don't have to worry about funding running costs or trying to time service intervals around my personal cashflow.

For clients it often boils down to the same issues.I would try to discourage clients from buying expensive perk cars on the company, the tax cost is often prohibitive, but you just have to do the calculations for them and let them decide.

I can't remember when I last advised a client to have private fuel provided by the company though, that's a benefit that seems to have been taxed out of existence.

Old Greying Accountant's picture

A case in point ...

Old Greying Acc... | | Permalink

nigel wrote:

I would try to discourage clients from buying expensive perk cars on the company, the tax cost is often prohibitive, but you just have to do the calculations for them and let them decide.

 

... which also illustrates why a client should always call their accountant before making any financial decisions!

When preparing the P11Ds for a client I discovered he had changed his company car. A bargain he told me, a 3 year old Jag for £19,000. How his face dropped when I said, yes, but your car benefit is based on the list price when new (£61,000), and you will be taxed on £21,500 each year. If only he had asked me first!

Old Greying Accountant's picture

I wonder ...

Old Greying Acc... | | Permalink

... where you would stand on a legal challange to this law?

It does seem a breach of human rights that you can be taxed on a benefit in excess of the actual cost of the benefit. Especially as it is weighted one way, i.e. if you have a classic car, the benefit is on the market value, which may be higher than the list price, so surely if provided with a second hand car, the benefit should be on the higher of price paid or market value at the time of acquisition (allowing for, for example, the situation where a company bulk buys ex rental/courtesy vehicle stocks at a discount that the employee would not get personally)

Car fuel - is it ever worthwhile?

raychidell | | Permalink

"I can't remember when I last advised a client to have private fuel provided by the company though: that's a benefit that seems to have been taxed out of existence."

I agree. Does anyone have any scenario where they think it still makes sense for the employer to pay for fuel for private journeys in a company car? I think it can do, from the employee's point of view, if he or she has a high level of private mileage and receives nothing in lieu if giving up the benefit of the fuel. But if the employer stops providing "free fuel" and is willing to pass on the savings to the employee (both Class 1A NIC on the benefit and the cost of the actual fuel) it seems to me that there are now almost no (realistic) circumstances at all in which it makes good tax sense. I will send a free copy of my book on Company Cars, due to be published shortly by Claritax Books, to the first person to convince me otherwise!

I suspect that the fuel benefit remains almost exclusively for those who think they have proper arrangements in place to prevent the charge from arising, but who come unstuck at PAYE review time.

Private fuel benefit

Marion Hayes | | Permalink

As with all other benefits you need to do the sums!

We had a fuel benefit which was a savng to us for all the years up to our children graduating!

Prior to Uni the dancing, riding, swimming, taxi service was non-stop and we then progressed to children at Leicester, Chelmsford and Liverpool universities. As their favourite word was Dad.....  please, he would visit at least one of them every weekend and it wasn't until the last trip to Liverpool that the benefit stopped being a saving.

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