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'My employees regularly use the company car for business purposes, even after hours - Can we escape the fringe benefits tax hook?'

by , 13 June 2014
Our tax experts get a lot of questions regarding company cars.

One question that always crops up is whether or not a company can escape the fringe benefits net if employees regularly use the company car for business purposes, even after hours.

Read on to find out how our experts answered this question.

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SARS has this to say about the regular use of company cars and fringe benefits tax

According to Natalie Cousens, the Managing Editor of the Practical Tax Loose Leaf Service, SARS says that a company car won't be considered a taxable benefit to your employee if the nature of his work is such that he regularly requires the business use of the car after hours.

And you don't allow him to use the car for private travel after hours (e.g. going to fetch a take-out dinner).

This is the one exceptional circumstance where you can escape the fringe benefits tax hook

If, for example, you're a 24-hour emergency plumbing service and you require your plumbers to take their company cars home with them, so they can be on-call at night, SARS will allow your plumbers to use the cars tax-free!

The only condition is that they mustn't use the cars for private travel once they get home in the evenings.

If your employees use company cars regularly, it's essential to make sure they keep a logbook to prove their use of the car just in case SARS has any questions.

Under normal circumstances, you must declare output tax on any fringe benefits you award to your employees.

Experts at the Accounting & Tax Club warn in this article that, 'if you fail to declare output tax on fringe benefits, SARS will charge you penalties and interest, calculated all the way back to when you first made the mistake.'

The bottom line: You can escape the fringe benefits tax hook if your employees use the company car regularly, even after hours. Just make sure your employees stick to the conditions we outlined above.
 

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