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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 use.

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 will relish.

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.

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For more information about contract hire, lease purchase, finance lease or vehicle hire purchase in the UK please contact Bowater Price plc 01494 536 536.

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Article Published/Sorted/Amended on Scopulus 2008-07-03 09:08:35 in Tax Articles

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