I don't understand why you think that should necessarily follow. Good results should imply good remuneration, but it boils down to how he spends his income. Indeed I would have thought a salesman, particularly a high flyer, would stand an above average chance of living a bit on the wild side, perhaps having gambling habits, and credit maxed out etc.
Certainly, but is the taxable value of that benefit not just the interest the employee would have to pay if he got the loan commercially?
What are you referring to - the few exceptions (which I didn't mention - how do you consider these might apply in this case?) or my reference to £5k which you snipped (maybe you think salesmen's cars shouldn't cost more than £5k) ?
Maybe - but I wouldn't want him and his distractions on my payroll.
Not quite. HMRC publish the rates to apply - currently 4.75%. You'd be doing well to get a car loan at that rate, I imagine.
Looks like a bloody good deal, then. And if the employee does in fact pay interest to the employer at said rate, the taxable benefit is NIL. That's more or less what I said, isn't it?
It is indeed - well remembered ;-)
I didn't comment at the time (well - you mentioned it in parenthesis, after all). But I don't reckon the OP should "go there", as they say. Would you lend money to a salesman who's 400+ miles away, working in isolation, and isn't even creditworthy....? :-)
Furthermore, the company has to pay 1A NICS... :-(
Yes the 5k.
No I don't expect that, in general, a salesmen's car should cost less than
5K. But ISTM that if said salesman is so strapped that he cant get a loan on his own, a 5K car seems about all he should be driving.tim
Wow... lots more replies than I expected... to address a couple of points:
To be honest, I wouldn't have minded allowing some private mileage etc, but given the business conditions out there, and the punitive VAT treatment, I'd rather pay them a bit extra. I would save about 2800 in VAT on the car, and 520 a year roughly in VAT on fuel. From what I understand I could only claim 1/2 the VAT on fuel only in private use, no VAT claimback on the car, and the employee has to pay benefit in kind.
Leasing isn't too bad an option, but at 13k I'm thinking just buy the car? (VW passat 2.0 diesel 140 PS)
For now though, going to start badgering the local tax office to get their confirmation in writing that if we satisfy the above points, they won't kick up a stink!
Thanks, Raj
Does that qualify me for perhaps a small parsnip please? [Unwaged wrinklies cannot afford to be proud :)) ]
A belated further thought. Will your sales person spending nights away from home "on business"? If so, you may be into what is, IIRC, somewhat grey territory as to just what use of the car will be business and what private.
Eg if staying in a hotel
o use of the car to drive a reasonable distance to get an evening meal would be business use (especially if there is no restaurant in the hotel); o use of the car to go the cinema wouldn't.
Probably. Depending on the facts. (And on who ends up looking at it and what socks they are wearing that day). You can try asking your local tax office about that but you may just not want to go there.
Also, while off your question, does your insurance company take the same view as HMRC of what is and isn't business travel? (My suspicion is that the insurers may well be less tolerant of any use at the margins if an accident occurred during that use. But that's possibly just me being a cynical old b*****d.)
Apologies if these are "teaching granny to suck" points.
Well, OK, you have a point, but unless there's reason to suspect that he might abscond with the car (seems unlikely if he wants to leave his employability undamaged), I think I would. Any extent to which he is unworthy of credit would not worry me because the loan would in effect be secured against his income from a reliable source (me), i.e. I would deduct the repayments from his salary.
Remember the alternative would have been to buy the car outright and entrust it to him.
That's what, 12.8% of 4.75% of most of the cost of a £15k-£20k car? That's peanuts, provided the guy's as good as his reputation.
and how do our top MP's get away with their BIG limos, especially Mr Brown who is NEVER seen in anything but one.
Gordon Brown's car will have special security features.
That's good - it means he could still get a job (with you) and maybe repair his credit score. Then I'd poach him.
Er - I wouldn't regard that as very secure.
That's one alternative - not the only one. Eg increasing numbers of employees lease / contract cars from their employers these days - using the allowance to meet the cost.
Well it's all peanuts at the end of the day, compared with what your high-flying salesman is putting on the bottom line. (Minor note - ER's NIC rises to 13.3% in April).
But the company also has to find the money to lend the employee. As you remarked earlier, they'd struggle to get it for 4.75%.
Gordon Brown's car will have special security features.
---------------
It does - have you not noticed the thickness of the doors and windows? Armoured Daimler V8 (supercharged). IIRC, the added strengthening started in Thatcher's era.
It's secure enough while he carries on working for me. Of course when you then poach him, it's another story. :-(
I didn't know you could do that. It looks very much like pretending it's not a company car when in fact it is.
Yes - AIUI it's quite common. The employer (a) can generally negotiate better rates with the contract hire firm, (b) control / restrict the make / model as req'd, (c) provide the insurance cover, so they know it's all ok, (d) ensure relief car included in contract, (e) keep hold of car if employee leaves, (f) ensure MOT and any fines etc are dealt with by employee.
For the employee, the risk of signing up to (say) a 3-year contract is removed, as is liability for excess mileage. All servicing / maintenance is taken care of properly (franchised dealer etc). Fixed and known cost from the outset.
There is no question about it being a co.car (providing, of course, the employee is correctly paying the full cost). All payments are taking through payroll (after tax, obviously) - and will broadly balance with car allowance (also taxable and NI-able).
One small downside - employee ends up paying VAT on VED and (I think) insurance.
A win-win. And what I'd consider seriously if I needed a guy to sell widgets in Scotland.
Yes indeed. But that wouldn't [1] be enough by itself to get out of tax. For that there is the specific tax exemption introduced in FA 1996 and now in section 295 ITEPA [2].
[1] I don't know and can't be bothered to check but the relief for security benefits used explicitly to exclude cars. [2] I'll admit I did checked that
But it's not the PM's car. Think of it as a taxi. Which trips are not WN&E business?
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