Alastair Kendrick, from MHA Macintyre Hudson, looks at the tax implications of car sharing.
On the face of it, car sharing can save employers costs - given otherwise they would have to pay mileage rates to employees who use their own car on business travel.
However, unless a car sharing arrangement is carefully controlled, the employer will leave employees exposed to a taxable benefit, and the company themselves could face a class 1A National Insurance liability.
A car provided in a car share arrangement is considered a 'pool car' and the tax rules say no benefit arises if these are available to a number of employees, the vehicle is parked at business premises when not in use and any private use is incidental. Incidental private use covers a situation when an employee is going on a journey early in a morning and therefore is permitted to take the car home the night before.
If HMRC inspect an employer, they expect a log to be availabe showing who used the vehicle and where it was taken. If HMRC are not satisfied that the record is accurate/complete then they may seek to charge benefit in kind.
I know with some car shares, an employee can hire the vehicle for private use. Whilst they do pay rental this would not avoid a taxable benefit - looking at how the rules apply, the rental cannot be offset. It would only be possible to offset if this was considered by HMRC to be a private use contribution. What constitutes a private use contribution is limited.
It is important those entering into these arrangements seek tax advice from a qualified tax professional.
This blog post is in reply to an article posted on Fleet News this week: Car sharing set for boom.