When is a company car not a fringe benefit?
A company car is a car provided by your company for the business and sometimes private use of an employee. You probably know your employee's private use of the company car is a perk (a fringe benefit). And this means you must deduct PAYE on the value of the private kilometres, which your employee travels in the company car. But did you know there are instances where a company car won't qualify as a fringe benefit? Read on to find out what they are so you can comply.
Before you consider handing your top exec the keys to a company car, it's important you know how to treat the use of this car on your payroll.
According to the Practical Tax Loose Leaf Service, company cars won't always be a taxable fringe benefit in your employee's hands.
If the following three criteria apply to your company cars, then there's no taxable fringe benefit for your employee:
The car is available and used by employees in general;
The employee uses the company car infrequently or its use is just incidental to its business use; and
The car isn't normally kept at, or near the employee's home outside of working hours.
Well there you have it. Knowing when a company car won't be a taxable fringe benefit will ensure you comply with tax law. It'll also help ensure your company saves thousands on the cost of the company car.
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