Company car versus extra salary - confused?

[grasmere]

Hi guys - can someone help a confused person please?

I am currently self employed and have been offered a job with a company car.

My query is that I really enjoy driving my current W202 and dont want to get rid. Ive searched websites but all advice re 'company car versus extra salary' is too general and 'confusing' so . . .

Does anyone have a simple explanation or advice as to how to determine whether its financially better to keep current motor and negotiate a salary increase in lieu of company car or would it not be worth it, thanks

 

[Rory]

Is the car simply a 'perk' of the job, and not really required for business use (therefore low business miles)? I assume from what you've said that the company doesn't have an opt-out scheme?

If you know what sort of car you're going to be offered then you can get an idea of what that would cost and perhaps get your employer to pay you that cost instead.

It often is worth opting out, especially for 40% tax payers, and especially if you already have a car available. Only you can calculate/estimate the cost of running your own car, based on its likely future use (mix of private and business miles), and compare that with the tax liability of having a company car vs the offer (or your calculation of what you need) from your employer.

Bear in mind that there's a 'peace of mind' benefit of having a company car which I reckon is worth a good £100/mth. The downside is you might not get the car you want.

www.cashorcar.co.uk may help on the company car front, but won't really give you much info on running your exisiting car.

 

[grasmere]

Is the car simply a 'perk' of the job,

thanks for the advice Rory, but no its needed for the job.

and Thanks for the link, I'll do some calculations etc

 

[scumbag]

i was going to put (Tongue in cheek) can you cash the car in for a loaf of bread down at Tesco's, thus meaning have the money.

however as you said its needed for the job, do they allow you to choose the car, can they, as suggested above, pay you that amount and you organise the car?

I dont know. I am one of the unlucky ones who doesnt get a choice in company cars or not. i dont get one and there is no need for one to go to and from work in. but i do get a Shogun to run about at work in!

 

[GrahamC230K]

If it were just a perk, I would say go for an allowance over the car. That way, you get the same money, taxed the same, just don't get any % salary increases on that portion of your income - so you will need to negotaite an annual allowance review.

If you must take a car, find out if it is a taxable company car, or a personal contract lease that your comapany administers. If i were to take a car, I still do not get taxed like a company car driver. I sign up to a personal lease, no deposit, company pays maintenance, insurance etc etc and buys me out if I resign or get sacked!

As you say you need the car for the job, I dare say depending on miles you will be better off going company car anyway - trouble is unless you have a big budget, I doubt you will get anything particularly satisfying.

I take an allowance and normally turn up at work by foot or bicycle!

 

[lotusmark2]

I have had a car allowance and mileage for 14 months now and have continued it with the new job I have just started.. I have been quids in, in every way.
I do about 12-15k miles a year and drive the Smart car for everyday use (45-50 mpg) and th SAAB for longer runs (28-35 mpg) that way I make the most of the milage rate day to day and split the milage use over two cars so dont have an issue with hitting a car with loads of extra miles.
Just what I do but may give you some ideas.

 

[grasmere]

I have had a car allowance and mileage

cheers, so without going into detail you get a 'non taxable' motoring allowance and cover ALL your own actual motoring costs? Is the allowance to cover an expected annual mileage or do you record business/personal and claim on that ?

 

[lotusmark2]

I get a fixed car payment detailed on my pay slip each month which is taxed as per the rest of my salary, I then note my milage each month and put in a claim at 40p per mile tax free (still in my first 10k miles this year) to my employer. I have ALL business miles covered including to and from my office.

 

[SimonsMerc]

I have ALL business miles covered including to and from my office.

You need to be careful here. The Taxman's definition of business mileage explicitly excludes travel to and from a usual place of work (commuting to an office). They may well decide (say five years from now) that they want you to pay tax on the commute - which will add up to quite a sum to pay back! :-(

-simon

 

[lotusmark2]

You need to be careful here. The Taxman's definition of business mileage explicitly excludes travel to and from a usual place of work (commuting to an office). They may well decide (say five years from now) that they want you to pay tax on the commute - which will add up to quite a sum to pay back! :-(

-simon

Cheers Simon.
I made sure that my contract states my place of work as "Home Based"

 

[imadoofus]

Cheers Simon.
I made sure that my contract states my place of work as "Home Based"

But if the Inland Revneu were to investigate you or your employer, and they found that you are at the office on more days than you're at home, then it doesn't matter what your contract says, they will determine that you are not home-based, and slap you with an assessment.

PJ

 

[lotusmark2]

But if the Inland Revneu were to investigate you or your employer, and they found that you are at the office on more days than you're at home, then it doesn't matter what your contract says, they will determine that you are not home-based, and slap you with an assessment.

PJ

Ah well, I just take mi chances
I have had this arrangement for over 12 months and my job is a bit of an "all over the place" type of thing

 

[GrahamC230K]

For some reason I can only claim 17p a mile. Is it true I can claim the difference up to 40p somehow?

 

[Rory]

For some reason I can only claim 17p a mile. Is it true I can claim the difference up to 40p somehow?

Normally, yes. I was going to reply to your earlier post, but I'll do it all in one go.

Normally, you claim the *tax* back on the difference between what your company pays you and 40p for the first 10K miles, and 25p for mileage greater than 10K. This is for business miles, not commuting.
So, assuming you pay tax at 40%, you'd get an extra 9.2p back for the first 10K, and 3.2p for mileage after that. You claim it after the end of the tax year - it can't be paid during the year.

HOWEVER - this *might* not apply in your case. Your scheme sounds like one of those ECO (Employee Car Ownership) schemes that are sailing very close to the wind in terms of tax avoidance (avoidance, not evasion). The Revenue is looking very closely at these schemes, because if you opt out of a company car, the key thing (and the biggest issue) is that you take on the financial risk. Glaring example - if you resign, you're stuck with the car. But in your case, the company guarantees to take it off you! So you have no risk. That's so blatent it's ridiculous!

The reason the rebate may not apply to you is that with ECO schemes, the company often takes into account the rebate in the calculations, and adjusts your contribution assuming the rebate has been paid.

 

[lotusmark2]

For some reason I can only claim 17p a mile. Is it true I can claim the difference up to 40p somehow?

Rory beat me to it

 

[GrahamC230K]

Cheers Rory - you are spot on.

 

[fuzzer]

For some reason I can only claim 17p a mile. Is it true I can claim the difference up to 40p somehow?

am i not right in saying that the 40p per mile plus 15p per passenger per mile is only if you use your own car.

If you opt out and take company car allowance i thought the rate dropped quite a bit. 17p sounds about right for an opt out claim on mileage.

 

[anarchy-inc]

www.cashorcar.co.uk may help on the company car front, but won't really give you much info on running your exisiting car.

What a great site , thanks!!! It has just confirmed my choice to keep my CLK over the Passat they were offering me!!!! :bannana:

 

[Dieselman]

am i not right in saying that the 40p per mile plus 15p per passenger per mile is only if you use your own car.

If you opt out and take company car allowance i thought the rate dropped quite a bit. 17p sounds about right for an opt out claim on mileage.

If you are standing the cost of your motoring then you can be paid upto 40p tax free.
If you are paid a seperate cash alternative you are taxed on the whole value of that but you make the recovery against your actual mileage.
If you cover enough miles you will recover all the tax paid on the allowance.

Does that answer your query?

 

[glojo]

You need to be careful here. The Taxman's definition of business mileage explicitly excludes travel to and from a usual place of work (commuting to an office). They may well decide (say five years from now) that they want you to pay tax on the commute - which will add up to quite a sum to pay back! :-(

-simon

Hi Simon,
Things might well have changed so please consider this as a question.

I used to claim mileage travelling from my home to the office because I had to carry 'equipment' from home to the office. This equipment was owned by my employer but was required to be with me 24 hours a day.

I wonder if this ruling still applies and how it can be interpreted?

Regards,
John