If your business owns or leases a car that several employees use for work, it is worth checking whether it qualifies as a pool car. Get this right and there is no benefit in kind for the employees who use it. Get it wrong and HMRC may expect income tax to be paid on the benefit.

What is a pool car?

A pool car is a vehicle owned or leased by a business and made available to more than one employee, but only for business journeys. Because no one uses it privately, it does not create a taxable benefit in kind, so employees using it are not charged income tax on it. Full detail is available in HMRC’s guidance: https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim23450

The rules

For a vehicle to count as a pool car, all of the following must apply.

• It is made available to, and actually used by, more than one employee, and no single employee has exclusive use of it.
• Any private use by an employee is merely incidental to their other use of the car.
• The car is not normally kept overnight at or near an employee’s home, except when it is kept at premises occupied by the business itself.

What counts as “merely incidental”?

This covers one off situations that are secondary to a business journey, for example an employee taking the car home the evening before an early start for a business trip. It is not intended to cover regular or planned personal use.

De minimis private use

HMRC allows a small amount of private use without it affecting pool car status. “Small” generally means no more than 5% of the car’s annual mileage, and it must also be infrequent. Emergency use, such as an employee needing the car because they have fallen ill, is also permitted.

Keeping records

HMRC does not formally require records to be kept for pool cars, but maintaining them puts you in a much stronger position if HMRC ever questions the arrangement. Options include:

• fitting tracking devices to the vehicle to evidence journeys and overnight parking, or
• keeping a logbook in the car for employees to complete on each journey, recording mileage and the purpose of the trip.

Our advice

We check in with clients regularly on benefit in kind declarations, but it is important that you tell us if any of your vehicles no longer meet the pool car conditions, whether that is the case now or becomes the case in future. The same applies to any other employment related benefits you provide. This allows us to help you declare these correctly to HMRC and ensure you and your employees pay the right amount of tax.

If you are unsure whether a vehicle meets the criteria above, please get in touch and we can discuss the next steps together.