I am likely to be employing a new surveyor in my practice within the next few months. I have not had any experience of company cars since I left my last place of employment in 1996 and subsequently have been self employed and/or a partner using my own car and claiming back the costs of motoring.
So I want the chartered surveyor to drive a reasonably smart and safe car. I mean this by age and size rather than by badge. I know there are three ways of doing this: -
1. Buy or lease a car for him and he pays tax. He claims fuel back at how many ppm??
2. Give him a car allowance anad he claims fuel back at how many ppm?
3. Give him the usual HMRC mileage rates and tell him to sort himself out.
I am concerned that using 3, the car he would drive would not be of a standard suitable for the work, so would prefer 1 or 2. How does it work and what are the costs/benefits?
Thanks
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Regarding 1 & 2 HMRC publish 'advisory' fuel ppm figures:
www.hmrc.gov.uk/cars/advisory_fuel_current.htm
They are a bit out of date, but should be reviewed next month.
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I understand that with '3' employers are increasingly concerned about the implications of an employee going about the employer's business in an unroadworthy car (let alone the fact that the car might not suit your 'image').
From a hassle point of view, leasing a car is probably easiest for the employer. Servicing etc. is all dealt with by a third party - rather than YOU having to chase on MOTs, tax etc. (remember you will be personally authorising each invoice as it comes through...)
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ref the servicing with lease cars, this is an optional extra which is probably not worth taking out. Obviously MOT isnt needed because its under 3 years. I believe most supply the tax.
If you opt for the employee to provide their own car then you can apply restrictions as to what they have and the age, i believe this is common practice.
Leasing is probably the best bet, i have recently ordered a couple of cars, one being an a3 for one of the engineers - good "image", very good economy, congestion charge exempt (when the new rates come in, until someone gets wise and overturns it) and good economy.
And well priced. The only downside has been the communcation from the leasing co. after i have placed the order and how long it is taking to get the cars. It will be about 24 weeks from when i placed the a3 order until i get it!!!!
With fuel, give them a fuel card and get them to track business and private mileage. Then charge them the hmrc rate for private mileage (about 9p per mile).
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"With fuel, give them a fuel card and get them to track business and private mileage. Then charge them the hmrc rate for private mileage (about 9p per mile)."
But it costs more than 9p per mile now. My employer gives us a fuel card and for those of us not getting personal mileage via the fuel card then it works like:
- We estimate the cost of fuel we will use per month and this is automatically deducted via payroll
- When submitting expenses we note down business miles and the expense form automatically calculates private miles based on the cars mileage
- The cost of fuel pro-rata is then calculated for the personal mileage and (a) if more than the amount deducted monthly the difference is deducted next month, or (b) if less than the amount deducted we get back the difference next month
- Over time the amount deducted monthly will be updated to reflect a true average.
For those who do mostly local/town private miles but motorway business miles then this pro-rata calculation is slightly in your favour.
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It sounds like your business is relatively small.
If you want to avoid hassle I'd discuss the matter with your new/potential employee. Tell him you'll pay him £x more per year so that he can provide himself with a decent looking, safe car. He'd want that anyway. The he can claim back from you the HMRC approved rate per mile. You'll know what sort of business mileage he's doing.
Should your relationship with him come to an end, you're not left with a car in your balance sheet or a lease deal you don't want any more.
Edited by Optimist on 16/05/2008 at 11:55
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When I ran a company car with a fuel card, and with private mileage deducted from my salary, we were asked to submit a form at the end of every month with the odo reading on the first of the month, the last day of the month, and then a breakdown by day of the mileage covered (business or private). They would do random spot checks both on the distance claimed from A to B, and also the odometer reading of the car to make sure people weren't making it up.
The deduction was a simple calculation:
(End of month mileage - start of month mileage - total business mileage) x 10p. The result was deducted from my salaries a month in arrears.
BTW, this was 2.5 yrs ago, and we were paying 10p a mile then with fuel at about 80p per litre. 9p at £1.20+ per litre sounds completely unrealistic.
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From a risk management perspective I would always want to own the car (ie I as in the company), as you have more control over it.
I'm guessing you are employing a surveyor as in building/construction industry? Having spent my entire working life in construction I can only draw on my own experience. I get 17ppm home to work and business miles (obviously home to work is taxed)
In terms of car suggestions (again, this depends on the salary) but one of our site agent has just got an A3 1.9TDI Special Edition. Now it looks nice, isn't particularly quick, but is cheaper for the company on tax, being a 119g/km emissions. Just a thought for you, only £15K on the road, first owner.
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>>Obviously MOT isnt needed because its under 3 years.
That's exactly my point. Because obviously in 3 years' time it *will* be needed and *will* be forgotten about.
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i was agreeing with you mapmaker, just pointing out that servicing wasnt necessarily included - although many companies do for ease.
The a3 special edition is what ive got coming but as i said the downside is the leadtime on it. If you are planning to lease, you need to get cracking or go with what they have in stock. we wanted an armrest (a £95 extra) so i guess this has delayed it.
Something like the a3 also has a very low BIK, which is good for everyone!
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Thanks
If an employee will be doing about 10,000 miles business and say 5,000 miles personal each year. Aged 27 male currently driving Pug 206 but looking for small BMW??? maybe.
What do you think is the best course of action?
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The 1 Series could possibly be the best option - they were offering some hefty savings on them a while back, plus the strong residuals should help lease costs.
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Lease a 6 mth old car over 30 months rather than a brand new car over 36 months - much lower leasing as the initial depreciaition has been taken by the 1st owner.
Equally you can buy (Cash or HP) a car registered as a Demo/Leasing Co/ex-hire car and it is VAT qualifying - you get the VAT back on the purchase - OK you have to charge VAT when you sell it but the VAT man takes ahit on the VAT not your company.
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Lease a 6 mth old car over 30 months rather than a brand new car over 36 months -
I can assure you that there nothing more certain to destroy a new employee's morale than to be given a secondhand car. It's fine as an interim measure but if it's permanent then it's soul destroying.
It's especially galling as the employee is paying tax on the car as if it were new and sometimes, as CO2 levels are being reduced on new cars, the employee could end up paying more tax than if it were new.
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Under option 2, where presumably your employee sources his own car, if you can accurately estimate his business mileage you should pay him at the maximum HMRC approved rate which is 40ppm (for the first 10k miles, then 25ppm) and flex the car allowance down. This is because the 40ppm will be free of tax and national insurance whereas a car allowance will be fully taxable.
If the car is used for non-business purposes then you will not be able to recover any VAT on its purchase, but you will not have to charge VAT on disposal. If you lease the vehicle 50% of the VAT on the lease rental will be disallowed.
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If you lease the vehicle 50% of the VAT on the lease rental will be disallowed. >>
And so will some of the rental if the car is "expensive" in HMRC terms. Plus you'll have the fun of completing a P11D for your employee if you own/lease the car and so provide him with a benefit.
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Undoubtedly, pay him and tell him to sort out a car or use public transport, and re-claim it.
Simpler, allows you to get on with what you do best, makes him take responsibility for him/his car, makes him use less fuel and allows him to set his own standards as to what constitues a suitable car - which will teach you something about him anyway. It will also make the roads safer as any dent is "his dent" and he'll pay less to have it serviced since he will care about the cost of it and will shop around.
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Whilst EdV's comments make some sense, not all employees are going to have £15k sitting around to buy a car - nor are going to want/be able to raise the finance.
It's too late to learn what he considers to be a suitable car when he turns up to your client in an ancient Fiesta.
And thirdly, if you make him take out the lease/buy the car, it puts all the risk onto him. What if you suddenly make him redundant?
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It's very easy to specify the car's age, condition etc. in the employment contract if giving a car allowance. I've seen it done frequently. Some companies even exclude certain badges, or convertibles or modified cars etc. Check with an HR consultant. I can suggest one such person if you'd like to contact me.
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Buy him a Citroen C1, Peugeot 107 or Toyota Aygo. >>
But he seems to want a beemer.
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