Legislation on company cars is now so punitive that the general rule has to be, “Don’t even think of having one”, says The Schmidt Report. But there is an exception.
A “perverse” result of the way the rules are written is that if you’re the boss at your firm, you could save a lot with a company car, “so long as they are not of any use to the business of the company”. Why? A company car is treated as a benefit in kind. But the tax calculation isn’t affected by the car’s value (as opposed to its list price when new) or how much private mileage you do.
So a company car is “most advantageous where you do a very high private mileage. [The tax is] also at its lowest where you drive a small, environmentally friendly car.” If you have children of driving age who could do with a hybrid car, why not get the firm to provide it? “It doesn’t matter that the business use is nil.”
You’d probably find the “taxable benefit, as worked out by Mr Brown’s new rules, would… be less than the cost of running the car, which… includes depreciation and financing as well as actual running costs”.