It’s called a pool car, because it is an asset that can be used by everyone in that organisation: ‘pooled use’.
However, HMRC is very keen to ensure that employees don’t use pool cars and vans as their regular company vehicles in an attempt to sidestep company car tax.
Therefore, to be treated as a pool car or van the vehicle has to be:
- available by reason of employment to more than one driver.
- actually used by more than one driver.
- must not ‘normally’ be kept overnight at one employee’s home.
A certain amount of private use is allowed if it is ‘incidental’ to the business use.
For example, if the car or van were to be taken home to allow an early start on a business trip.
If, however, there were frequent uses of this type, it would be treated as a company car or van and benefit in kind company car tax would be liable. The employer would also be liable for class 1A national insurance contributions on the benefit, too.
So a pool car must remain just that – a vehicle that stays at work for business use only. If you are an employee you should ensure that:
- Accurate records of the pool car’s use are kept – a sign out the key, sign back in is a minimum;
- The pool car is taxed and insured for business use;
- The pool car is regularly inspected for condition (tyres, oil, fluids, and so on) and generally meets duty of care standards
The same points cover a pool van, too.
Shared use of a company car
In some organisations a few employees share the use of one car – it might be what was once a pool car becomes used by a couple of employees on a regular basis, including private use. The legislation sets out rules to ensure that each employee only pays tax on their usage of the car.
In this situation the company needs to calculate the cash equivalent of the car as if each of the drivers had exclusive use and then reduce this on a ‘just and reasonable’ basis.
HMRC will accept any split of the benefit that has been agreed between the company and the employees, as long as it doesn’t artificially reduce the overall amount of tax payable.
A logical way to split the benefit is pro-rata to the number of days when each employee was the sole or main driver or took the car home overnight.
If the company pays for fuel and allows the vehicle to be used by the drivers for private mileage (including commuting), the employees should share the tax liability for the free fuel in the same proportions as they share the car benefit liability