Car schemes

A UK company can provide a fully electric car to its employees. The Employee will have a benefit in kind and therefore a P11D. The list price and extras of the car will need to be looked up and the employee will be taxed 2% on that value. This beats a 20 or 40% PAYE charge by a long way.

To buy or rent a car into the company, the staff member could take a pay cut to cover the costs. Salary sacrifices are important to get right - that employee is giving up the right to that level of pay. It means they do not get it back necessarily in the future if the car is not longer available. You should seek HR advice on this.

At a VAT level, if there is personal use only on the car, then no VAT can be reclaimed. If it is for business and personal, then the split is 50/50. If it’s 100% business, then you can have all the VAT back, but then there’s no staff benefit. Car must be demonstrably kept in the company over night and every mile logged to evidence this.

Corporation tax deductions are based on whether the car is rented (in which case a nil impact if being covered by salary sacrifice) or purchased, in which case the asset will carry annual allowances over several years.

For more info on salary sacrifice please refer to: https://financebox.co.uk/articles/2021-04-14-salary-sacrifice

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