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A company vehicle is a car or van owned or leased by a business and used either by the owner/director of the company or given to an employee for their use. Find out all about the benefits and responsibilities in our guide!
A company vehicle can be given to one individual or else provided as a pool car or van for several employees to use. It can be given as a necessary tool for the employee (including the director) to enable them to do their job, or in recognition of an employees’ status or contribution to the company. A company car can be provided for combined business and private usage or else for business use only.
A ‘company car’ can be offered by any type of employer - not just a ‘company’. Types of businesses that typically offer company vehicles include sole traders and other types of self-employed persons, Limited Liability Partnerships (LLP), charities, embassies, local or government Authorities as well as Limited Liability Companies (LTD) and Public Limited Companies (PLC).
A note on company directors: The benefits and taxation rules are the same for employees as they are any company director being given a company car or van, therefore where the term ‘employee’ is used, this includes any company director being given a company car or van.
Employers can benefit from offering company cars or vans in the following ways:
The employee benefits of being given a company car or van are:
Owning a company vehicle (i.e. either purchasing one outright or via an on-going payment system that results in ownership) can be a beneficial but costly venture for any business. This is because this route usually requires large up-front payments, plus the long-term upkeep can be expensive. Ownership also brings with it aging-vehicle problems such as reduced reliability and safety, depreciation risk and financial loss on selling, not to mention the challenge of finding a buyer.
Leasing (rather than owning) a company car or van, however, can help businesses avoid some, if not all, of these risks and also offers a VAT efficient and very low risk (and hassle-free) strategy for providing company vehicles.
Where the company vehicle is owned by the business (i.e. is purchased), the business is responsible for all administrative tasks relating to it (i.e. MOT, road fund licence, breakdown cover, servicing, maintenance, and repairs). However, if the vehicle is leased, most of these features are included in the lease package, meaning the business doesn’t have to concern itself with organising nor paying for these. Moreover, the leasing company usually provides an on-going paper trail for the vehicle, further lessening the administrative load.
The administrative responsibility and load of offering a company vehicle differ significantly depending on whether the vehicle is owned or leased.
Importantly, employers who offer company vehicles (whether leased or owned by the company or employee) have a legal ‘duty of care’ to employees to ensure vehicles supplied are safe. The Health and Safety at Work Act 1974 requires employers to ensure the health and safety of employees, as well as others who may potentially be affected by their activities when ‘at work’. As such, the company car or van (as well as any vehicle driven by an employee who is accepting a company vehicle allowance) is viewed as a ‘place of work’.
For businesses running a fleet of lease vehicles, Select Car Leasing offers a dedicated account manager that will provide your business with the most up-to-date expertise on employer and employee responsibilities relating to company cars, fleets and company car/van allowances.
You can read more about our fleet and fleet management services in our dedicated section.
Consequently, all businesses should have a tailored company vehicle policy drawn up, and this should be explained to and signed by employees in acknowledgment that they have read and understood the terms. In addition, businesses should also conduct risk assessments.
If your business if offering company vehicles or has employees who drive a vehicle as part of their work responsibilities, then a company car policy expert should be engaged to help ensure that the business is fulfilling its legal corporate responsibilities.
As an employer, you’ll need to ensure that your employees understand what their responsibilities are when being offered a company car or van, including:
Employers should also consider the following factors when offering company cars or vans:
Information is provided as a guide only. Select Car Leasing cannot be held responsible for any personal or business decisions made as a result of information provided in the guides. As with all aspects of taxation, it is the responsibility of individuals and businesses to understand the rules and regulations and act accordingly. As personal and business circumstances can vary, it is also advised that you take professional accounting advice before making a final decision.
If you'd like to speak with our friendly team about business vehicle leasing, simply call 0118 920 5130 or email us at: enquiries@selectcarleasing.co.uk
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