How much is a company car worth to an employee?

How much is a company car worth to an employee?

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Hi all,

As part of an annual pay review one of our employees asked for a company vehicle rather than a pay rise. We've gone ahead and purchased a company pick-up truck, it's treated as a van so the BIK is also favourable to the employee. We are not providing fuel. I want to show him what the company vehicle is worth to him annually (as a comparative figure Vs a pay rise). 

We've paid £28k inc vat for the vehicle and will also pay for insurance, mot and servicing.

Any suggestions for a good format to present this in? Should I gross up his net salary to show what he would have paid if purchasing with tax paid wages? Thinking of splitting the cost of the vehicle over 5 years.

Many thanks

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RLI
By lionofludesch
05th Sep 2018 15:41

Well, be very careful there.

The employee could end up paying tax on the higher of the salary foregone and the benefit in kind.

But - sure - for the purposes of illustrating your largesse with a few jottings on the back of a beermat in the pub, gross up the total of cost of vehicle, less residual value, plus tax, insurance, repairs, anything else you can think of. If you're basing the calculation on what it would've cost him, I think it's fair enough that you include the VAT.

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