A question that we are often asked is “What Makes a Company Car a Pool Car?”
The following five conditions must all be fulfilled for a car that is provided by a company to be considered to be a Pool Car:
– The car is made available to, and actually used by, more than one of the employees;
– The car is made available, in the case of each of those employees, by reason of the employees’ employment;
– The car is not ordinarily used by one of the employees to the exclusion of others;
– In the case of each of the employees, any private use of the car made by the employee was merely incidental to the employee’s other use of the car in that year; and
– The car is not normally kept overnight on or in the vicinity of any residential premises where any of the employees are residing, except as part of a business journey.
If these provisions are met, there is no taxable benefit for the employees that drive the company car.
Earlier in the year, a First Tier Tax Tribunal between In Vinyl Design Limited and HMRC tested whether the cars provided by the company were, indeed, Pool Cars.
The Tribunal ruled that all five conditions are “essentially a question of fact” and must all be satisfied and, in this case, the company failed on three counts:
– There was no textual evidence to show that the cars were not ordinarily being used by one employee to the exclusion of the others;
– There was no documentation to show that private use of the cars was prohibited; and
– The cars were normally kept overnight at the employees’ homes.
On the third point, In Vinyl Limited argued that the cars had been kept by the employees due to the risk of vandalism or theft. However, the Tribunal ruled that this is irrelevant when it comes to satisfying the conditions for a car to be a Pool Car.
In view of this ruling, our four key recommendations to validate that a car is a Pool Car are:
– Keep a Travel Log for each Pool Car detailing the date of use, the employee using the car, the mileage and the primary reason for the travel.
– Provide Insurance Cover that allows all company employees to be potential drivers and, where possible, that stipulates ‘business mileage only’.
– Ensure that there is a written Pool Car Policy that specifically prohibits private use of the vehicles.
– Prevent a car being habitually kept overnight by an individual employee.
If you are unsure as to whether you are meeting the conditions for a Pool Car, please contact firstname.lastname@example.org to arrange a free consultation.