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Consider these costs before you give employees company cars

by , 15 July 2014
A company car is a vehicle your company provides an employee for business purposes and sometimes private use.

Experts at the Practical Tax Loose Leaf Service say before you consider handing your top exec the keys to a company car, it's important for you to know how to treat the use of this car on your payroll.

If you don't know when and how the use of the car is taxed, you could end up under-deducting PAYE - and a 10% penalty from SARS is inevitable.

The second thing you need to consider before you give employees company cars is the cost of supplying this car. Read on to find out more about this so you can budget wisely when it comes to company cars.

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If you're thinking of giving your employees a company car, consider these costs first

#1: You must consider the costs you'll incur when buying the car.

If you finance the car, make sure you include this in your calculation for these costs.

#2: You must consider deductions.

According to the Practical Tax Loose Leaf Service, you can claim a deduction for the wear and tear on the car at a rate of 20% per year. This means it'll take you about five years to fully deduct the cost of the car.

#3: The last thing you must consider is maintenance costs.

You have to keep in mind that your company has to carry the costs of running, maintaining and insuring the vehicle.

Note: This won't come cheap when you consider that company cars are often abused by their drivers.

As you can see, supplying a company car is quite complex. You have to consider all these costs so you can budget wisely for this expense.

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