Is it time for businesses to rethink company cars?

22nd Apr

The company car has become a highly charged topic among employees who have been working from home for over a year, according to Richard Bull, tax partner at national audit, tax, advisory and risk firm Crowe.

Bull, who is based in Crowe’s Midlands office, said: “As we enter a new financial year, it could be a good time to look at your company car policy afresh.

“The company car has always been seen as a major management perk, but as most have been parked on the drive for the last 12 months, the benefit has been minimal.”

Employees are still taxed on the Benefit in Kind for whichever kind of vehicle they drive and many are unsure if the sums still work in their favour.

Bull continued: “When managers and directors were covering many miles a year, there were clear benefits such as; not having to pay for servicing, brakes and tyres as well as the company paying for fuel.

“However, with the pandemic having a significant effect on the use of these vehicles, as well as other factors, such as the Birmingham Clean Air Zone coming into force on 1 June 2021. There is much to reconsider with company cars. ”

He said that employers should be asking whether now is the right time to go electric with 100% first year allowances for companies, and low benefit-in-kind rates for employees.

“Employers can pay for charging points at their employees’ homes and there is no Benefit-in-Kind charge for the employee and the company gets a full tax deduction.

“The same 100% write off against company profits applies if the company installs charging points at work. If employees choose to charge their cars at work, they can do so, again without any Benefit-in-Kind issue.

“We know from speaking to clients that many company directors have been thinking about moving their fleet across to electric, and I think now is the time to move this topic to the top of the agenda.”

He added that it was a complex subject with factors such as environmental considerations, the company’s image and reputation, the change in working practices and location, as well as financial issues all to be considered.

“There is no right or wrong answer for any individual business, but we can help you weigh up the options and comment on the financial implications of your developing thinking.”

BusinessWorks Wocestershire & Black Country spring 2022 | BusinessWorks Magazine

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