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If you’re an employer or employee dealing with company cars, you’ve probably heard of ‘pool cars’. They sound simple enough – shared cars for business use. But when it comes to taxes, things can get tricky.
What’s a Pool Car
HMRC sees more than just a pool car as one shared by employees. For them, it’s about whether the car provides a personal benefit. If it does, it could mean a tax bill for the user.
The Golden Rules: To keep a pool car tax-free, HMRC has some strict rules:
- More than one employee must be able to use it
- Just one person shouldn’t mainly use it
- It’s not for private trips (with some exceptions)
- It’s not usually kept at someone’s home overnight
A Bit of Personal Use is Okay, and you won’t get in trouble for:
- Taking the car home to start early on a business trip the next day
- Popping to the shops after a business meeting without driving extra miles
But be careful! There’s a difference between this ‘incidental’ use and regular personal use, even if it’s minor.
When a Pool Car Isn’t a Pool Car
Your personal car may break down, and you need to use the pool car for a while. This doesn’t automatically turn it into a fully taxable company car, but it does change things a bit.
What Happens If You Use It Personally?
If you do end up using a pool car for personal reasons, you might face some tax. But it’s better than you might think. HMRC will work it out like this:
- They’ll calculate as if you had the car all year for personal use
- Then they’ll reduce that amount fairly based on how much you actually used it
For example, if Shaun uses the pool car for 900 personal miles out of a total of 18,000 miles driven that year, and the full year’s tax would be £6,000, he’d only be taxed on £300.
Pool cars can be a great way for businesses to provide transport without hefty tax bills. But it’s crucial to stick to the rules. If in doubt, keep detailed records and consider getting advice from a tax advisor. Remember, a little care now can save a lot of headaches (and money) later!