Pool Car Tax Guide for Employers

22nd July 2024

Employees with access to company cars often face a tax burden on the ‘benefit in kind’ of having a car at their disposal. However, where an employee has use of a ’pool car’, there is no taxable benefit and an entry is not required on form P11D.

Furthermore, the employer would not be required to pay Class 1A national insurance contributions. The conditions for a car to be treated as a pool car are very strict and often misunderstood:

WHAT IS A POOL CAR?

Unlike a standard company car assigned to a single employee, a pool car is a vehicle available to multiple employees for business purposes. As long as certain conditions are met, there’s no taxable benefit for the employee, and the employer avoids Class 1A National Insurance contributions on the car’s provision.

The Key Conditions for Pool Car Tax Exemption:

HMRC lays out these critical conditions in employment income legislation:

Multiple Users: The car must be genuinely available to and used by more than one employee.
Employment-Related Access: The car’s availability must be solely due to the employee’s job.
No Exclusive Use: The car cannot be used by one employee to the exclusion of others.
Minimal Private Use: Any private use by an employee must be incidental to their primary business use of the car.
Overnight Parking Restrictions: The car shouldn’t be normally kept overnight near any employee’s residence, except on the employer’s premises.
No Private Use Insurance: The car’s insurance coverage must not extend to private use.

Remember:

These conditions are strict, and failing to meet any one of them could result in the car being treated as a company car, triggering tax implications for both the employee and the employer.
It’s crucial to have a clear pool car policy outlining access procedures, booking systems and acceptable private use limitations.
If you’re unsure about your pool car’s tax classification, call us on 01384 376 964 to avoid any potential tax liabilities.