Fleet News

Car sharing: the tax issue

Fleet news logo

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.


Leave a comment for your chance to win £20 of John Lewis vouchers.

Every issue of Fleet News the editor picks his favourite comment from the past two weeks – get involved for your chance to appear in print and win!

Login to comment


No comments have been made yet.

Compare costs of your company cars

Looking to acquire new vehicles? Check how much they'll cost to run with our Car Running Cost calculator.

What is your BIK car tax liability?

The Fleet News car tax calculator lets you work out tax costs for both employer and employee