Is the Company Pool Car a Genuine Pool Car
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Many company directors and owners of small to medium sized companies feel
that there has developed over the past ten years an unjust and ever increasing
burden of taxation. There is a lot of evidence to suggest that when people feel
they are heavily and unfairly taxed they start to look for ways of getting
around the tax system, which perhaps they would not have done, if they felt the
tax system were fair.
As a contract hire company it is quite surprising to discover the proportion
of vehicles that are being treated as pool cars, it does make one wonder whether
they can indeed all be, in the true sense, pool cars. It is important for a
company to be aware of the rules governing company pool cars, as they really are
quite specific and restrictive and of course a pool car is like red rag to bull
when it comes to Inland Revenue.
For a car to qualify as a pool care there can be no private use. It is
important to keep a log of all the journeys and mileage that the pool car has
done and this should correspond with the vehicle's mileage. If occasionally an
employee has to visit a client the following morning, it can be acceptable that
they take the car home the previous evening, particularly if they have an early
meeting and it would be out of their way to return to the office, to collect the
car. If this were to happen on more than the odd occasion, Inland Revenue could
well see it as private use.
There can be no private use of a company pool car; it cannot even be
available for private use. The car has to be kept on the company premises
overnight. Sometimes there is nowhere that a pool car can be kept on the
company's premises, or as can often be the case, nowhere that is safe. Under
these circumstances it would not seem unreasonable that a director or employee
takes the vehicle home at night. This however is rarely acceptable to Inland
Revenue. They will usually want to treat this as commuting, which is private
An alternative would be to take it to a lock up garage. Inland Revenue are
however likely to look at the proximity of the garage to the office and the
directors home, if it is closer to the directors home they will again want to
treat this as private use. You could write to Inland Revenue to try to get
clarification. However this is really putting your head above the parapet and
will almost certainly be followed by a letter from the Revenue telling you that
you are going to get a visit by an Inspector, a prospect few company directors
There are clear advantages from a tax point of view to having a pool car;
100% of the Vat can be claimed back on contract hire, if a car is purely for
business use. But the potential complications with Inland Revenue can sometimes
outweigh the advantages.
The Revenue will of course be looking at the type and value of the company
pool car If it's a five year old Vauxhall or perhaps a Smart car its easy to see
why that might not be everybody's first choice for personal use. If however the
pool car is an Audi A8, the next question will be, what is the director driving
home in at night? If it's a Ford Focus then it's not difficult to see why the
Inspector might be slightly sceptical.
It is worth considering whether you company pool car is indeed a genuine
company pool car. If it is not and in practice is a car for the director's own
use, it may be time to consider making some changes to the way this is set up.
If the car is on contract hire it can remain so but treated as a company car for
the director. The tax that the director will pay could be grossed up and taken
as a dividend. Alternatively a car could be taken on a personal contract hire
basis rather than contract hire and again the cost of the car could be covered
by a dividend that is paid to the director. The company accountants can usually
help to advise which route may be more practical.
About the Author
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Article Published/Sorted/Amended on Scopulus 2008-07-03 09:08:35 in Tax Articles