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Today our experts answer two of your burning company car questions

by , 19 June 2014
A company car is a vehicle your company provides an employee for business purposes and sometimes private use.

But don't be fooled by this simple definition. Dealing with company cars is complex - and not just when dealing with PAYE! The questions our tax experts get on this topic are proof of this.

Continue reading to discover our expert's answers to two burning company car questions.

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The answers to two very common company car questions

Question #1: My employee wants to buy the car from the company after his right to use it as a company car comes to an end. What should I do in this case?

Tax experts behind the Practical Tax Loose Leaf Service explain that if your company sells the car to the employee at market value or at the depreciated value, your employee won't have a tax liability.

But if your company sells the car to him at a price below the market value, this is a taxable fringe benefit. Your employee will have to account for tax on this.

Also check out this article. It explains further what you need to do when an employee wants to buy a company car.

Question #2: What happens with a leased car? We want to buy the car on behalf of the employee. The agreement is that he must pay us back. I want to know if there's a tax saving here.

According to our experts, in the case of a financial lease, you must register the lease in your name as an employer. Your company will own the car and the vehicle will remain a company car, even if the intention is that your employee will buy it from the company.

If your company pays the premium on the employee's behalf and recovers the premium amount from him (without giving him a benefit), he won't be taxed on this. After all, the situation would be the same as if he (employee) had paid the premium himself.

There you have it. We hope these answers have given you some clarity on company cars.

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