For small business owners, particularly those managing limited companies, the concept of a pool car can be an attractive option. It provides a cost-effective way to offer vehicle access to employees for work purposes, while potentially avoiding the tax implications associated with company cars. 

This post will explore the rules surrounding pool cars, focusing on the implications of Benefit in Kind (BIK) tax and the forms P11D, along with practical suggestions for record-keeping and managing private use.

What is a pool car?

A pool car is a vehicle owned by a company and made available for use by multiple employees for business purposes. To qualify as a pool car and avoid BIK tax, the vehicle must meet specific criteria:

– Available to multiple employees: The car should be used by more than one employee and not assigned to a single individual.

– Business use only: The car must be used only for business journeys. Any private use should be incidental and not planned.

– Not kept overnight: The vehicle should not be kept overnight at an employee’s home, except when it is necessary for business purposes.

Benefit in Kind (BIK) Implications

If a vehicle does not meet the criteria for a pool car, it may be classified as a company car, attracting BIK tax. This tax is calculated based on the vehicle’s list price and its CO2 emissions. Ensuring the car qualifies as a pool car can help avoid these additional tax charges.

Form P11D

Employers must report any benefits and expenses provided to employees on a form P11D. If a car is classified as a pool car, it does not need to be reported on this form. However, maintaining clear records is essential to demonstrate compliance with pool car criteria if queried by HMRC.

What records should you keep for a pool car?

To ensure compliance and avoid tax implications, businesses should maintain comprehensive records, including:

– Journey logs: Record all journeys made in the pool car, noting the date, purpose, and mileage.

– Booking system: Implement a booking system to manage car usage and ensure it is available to multiple employees.

– Overnight stays: Document any instances where the car is kept overnight at an employee’s home, ensuring it aligns with business needs.

– Maintenance records: Keep detailed records of vehicle maintenance and servicing to demonstrate its use for business purposes.

Managing Private use

To maintain the status of a pool car, it is crucial to restrict private use. Any private journeys should be incidental and not planned. 

Regular audits of the journey logs can help ensure compliance and identify any misuse.

Conclusion

For small businesses, utilising a pool car can be a cost-effective way to provide vehicle access without incurring BIK tax. By adhering to the criteria for pool cars and maintaining meticulous records, businesses can ensure compliance and avoid unnecessary tax liabilities. 

If you’re unsure whether a pool car would be a viable option for your business, please get in touch. We can help you be sure that you’re operating one correctly and avoid any unforeseen and unwanted interest from HMRC as a result.