Author: MILES PETERS
For business owners, there are many things to consider when recruiting new staff and one of the biggest costs is a new company car that comes as part of the package you offer your new employee.
Of course, on day one, you never know how things will pan out so you’ll likely have that employee on probation until their abilities can be confirmed.
But what about that company car? If the employee doesn’t work out, you could find yourself with money tied long term to a company car that you no longer need. Worse, you could pay out expensive termination charges.
One serious option is to hire a car during that probationary period.
A rental car can be new and modern, such as the latest Ford Focus or BMW 1 Series, making the right impression on clients. The car will also be fully insured for business use. This offers the ultimate flexibility until you’re ready to put in that company car order and can even be extended to three of even six months if the employee’s car choice is on back order.
You don’t have to worry about the condition of the car, its brakes, tyres and so on as the rental company can cover all those legislative duty of care issues for you. Better still, the rental car can be tax efficient as it is a business expense and can be written off against your income before tax.
One thing to be aware of if you do hire a car is that whilst rentals over 30 days may be exempt from company car tax, this only applies if the vehicle does not have any private use. Simply commuting from home to work doesn’t count as private use but if the employee was able to use the vehicle for social/domestic use at weekend then a BIK (benefit in kind) charge may apply.
Many fuel efficient and low CO2 cars are available for rent that can help reduce the tax exposure for employees. You should consult your accountant or financial adviser to clarify the tax situation case by case as required.
Short term rental car contracts are easy to set-up, they can even be arranged on the day you want to pick the car up. Also, paying by company credit card can avoid the need for credit checks and keep open any of those much needed lines of credit to help the cashflow of your business.
But the key thing is this: you maintain flexibility. If your new starter turns out to be a complete flop, then you don’t have an expensive company car to re-allocate. For SMEs, the car rental option perfectly matches demand to requirement – until you can offer your employee a full time contract. And a company car.
Editor’s note:
Check with your accountant or financial adviser that the steps you are taking are appropriate and comply with tax regulations – they will be able to provide the professional company car management advice for your particular business and business requirements.
