subject: Company Car Taxation And The Pinch Effect To The Employees [print this page] Many companies have adopted provision of company cars to their employees in an attempt to promote their public image as well as ease the employees commuting hassles. The cars have provided a two way benefit platform with employees enjoying the feel of low cost ownership of prestigious vehicles while the company benefits from company car taxation evasion by transferring it to their employees. The employees also undertake the maintenance mandate of the vehicle and are expected to report any repair and maintenance needs for the cars which eases the employers car maintenance responsibilities.
Many employees like the schemes as they gain access to such cars for personal use cheaply and with ease. Some of the employees have even gone to an extent of selling their own cars and adopting the use of company cars. In laymans understanding, they do so to evade the escalating fuel costs but in real sense, they reap much more benefits from company cars as compared to private cars.
One major advantage of using a company car is the reduced cost of acquiring it. Despite the fact it is virtually provided for free, the charge imposed as company car taxation is minimal. The strong bargaining power of companies that make considerable purchases of cars for their employees makes it possible to acquire them at a reduced cost, which in turn leads to a decrease in the tax imposed on the vehicle. In addition, such companies also benefit from subsidized maintenance costs, which also acts to the advantage of the employee.
According to company car taxation law, any car that is provided to the employee is considered to be one of the fringe benefits and is taxable. In real sense, a company car is always considered to be an additional income to the employee which is liable to taxation. However, one needs to actively participate in filling in of the taxation form to ensure that what the employers put down on paper is indeed the right thing. Company car taxation is highly involving and some employers take shortcuts in calculation of the amount taxable from gross salary even if its not a true representation of what the employer offers to the employees.
If by any chance an employee does not use the company car for personal use, they should not be liable to company car taxation. However, if the employer allows one to drive home with a company car, the employee will be liable to company car taxation. There are several schemes used to calculate the amount that will finally be charged. The employer may choose to use mileage based calculations, commuting rule taxation or annual lease value.
These three company car taxation schemes have different terms and conditions which one needs to understand. As an employee, you should ask your employer about the scheme that they use to fill your taxation details so as to be well equipped on what you need to do to keep the tax imposed on the low as well as utilize the asset to the limit.
