Pool Cars

Background

Pool Cars have been about a number of years, however their use has greatly reduced and their use comes up less often now. Although pool cars can provide numerous benefits to an employer, it is important to understand the tax implications associated with them and ensure compliance, that in turn will allow you to make informed financial decisions.

What is a Pool Car?

A pool car, or pool van, is a vehicle owned by a company and made available for use by its employees. Generally, a pool car is kept in the company's designated parking area and is accessible to any employee wanting to use it for official business. For instance, a company may have a small vehicle that is used when people have to make local deliveries.

The primary benefit of pool cars lies in their tax-exempt status, since in theory, they provide no personal advantage to an employee. This contrasts with company cars, which attract tax for both the employer and the employee. If a company can completely account for all expenses related to pool cars, they can avoid standard 'benefit in kind' tax calculations that are common with company cars.

What Are The Complexities?

HMRC is fairly diligent in preventing the use of pool cars as 'main' company vehicles to avoid company car tax. It is important for a businesses to ensure that any 'pool car' meets ALL the following set criteria - HMRC booklet 480 states: 

• It’s available to, and actually used by, more than one employee.
• It’s made available, in the case of each of those employees, by reason of their employment.
• It is not ordinarily used by one of them to the exclusion of the others.
• It is not normally kept overnight on or near the residence of any of the employees unless it’s kept on premises occupied by the provider of the car.

If the car doesn't meet the requirements above it will be classified as a company car, meaning standard BiK rules apply. It should also be remembered that this will also mean employer's Class 1A will be due.

What About Employees Having Cars Overnight?

For a car to not be classified as 'normally kept overnight' at an employee's home, it will need to be taken home less than 60% of the year (normally 219 days). However, HMRC might question this even when the percentage is below 60%, as it stretches the term 'pool car' just a bit.

We have heard that such excuses as "we have insufficient office parking space at the office" will not be accepted by HMRC as valid reasons, your mileage may vary of course! However, an early start for a business trip (for example) will be fine as far as HMRC are concerned. as long as it is correctly logged.

You Will Need To Keep Evidence

To detail operation of a pool car, there are a couple steps you should take as a business - some examples are:

• Make sure you log any instances where the car is stored overnight at an employee’s home (and a sensible reason).
• Try to ensure that the keys are stored at the office whenever possible.
• Have a written policy for employees which explicitly informs them that the car is strictly for business use and private use is prohibited.
• Keep detailed records and mileage logs that document each journey, including a reason.
• Retain logs showing that your insurance covers multiple drivers - this helps show that many people can use the car.
• Generally look after the car (servicing, maintenance etc) and keep records, these show the business is looking after the car and it is not an individual's responsibility.