Having private use of a company car is one of the most common examples of a benefit in kind in the workplace but since it isn’t easy to determine a taxable value
HMRC have created a specific set of rules for company car use.
HMRC will want an employee to pay tax if the employee or their family
have use of a company car for private purposes. This would usually include commuting from home to a permanent workplace since in the eyes of HMRC commuting is not considered business mileage. For more information on business mileage check out our article make a successful claim for business mileage – How it works.
The taxable value of the car will depend on how much the car costs to buy and the type of fuel it uses. Cars with low CO2 emissions have a lower taxable value resulting in less tax being paid. An adjustment is also made when an employee only has access to the car part time.
If the employer also pays for the fuel the employee uses during private use then there will also be a fuel benefit charge to calculate.
Luckily HMRC provide a handy company car and car fuel benefit calculator
to help determine the taxable value of both.