a company car-- pretty plain andsimple, i think everyone understands it-- is where theemployer provides a vehicle for the employee to use. typically, business mileage ispaid for in terms of the fuel and sometimes personalfuel as well. all the maintenance and repaircosts, the tyre changes, the oil changes, the mots ifnecessary, and all those kind of things are incorporatedwithin the company car. there are some benefits to theemployer, certainly in terms
of corporate manslaughter lawwhich came in a couple of years ago because they canactually control the vehicle, and the finger can never bepointed at them, but it's not always the most efficient wayfrom a tax perspective for the employee to have a vehicleto use at work. a company car allowance isnormally paid through the pay packet, so tax, nationalinsurance contributions for both the employee and theemployer, are applied to it. it's paid as a sum of moneywhich is given specifically to
cover the cost of the lease orto cover the cost of a loan for purchasing a vehicle. normally, when a company carallowance is applied, the company will then pay a smallamount to cover the true cost of the fuel, 10, 12, 15 penceper mile dependent on the vehicle that you're driving. a mileage allowance is anamount of money that the employer pays to the employeefor the business miles that they do in their own car.
under current legislation,that money is paid to tax free, so it's a verytax-efficient way for companies to pay forbusiness miles. and under the current inlandrevenue mileage allowance rates, it's 45 pence per milesfor the first 10,000 miles and 25 pence thereafter. what method is best for whom? so out of the company car, thecompany car allowance or the mileage allowance?
firstly, if it's a field salesrole, the people that you're targeting to join your businessprobably will have had either a company care or acar allowance in the past, and they're normally not attractedto roles which offer just a mileage allowance, even thoughsometimes it can be a better way of doing things. so if it is a field sales roleand you're targeting field sales people, you're going tohave to opt for the company car or the companycar allowance.
from the employee's perspective,it really depends on how many business milesthat you're doing. you can actually tally up andweigh up the various different options, and certainly withone of the companies that we've recruited for in the past,there's a sweet point which is about 22,000, /25,000miles where actually is a benefit to have acompany car over the company car allowance. so i think it depends on themileage that you're doing, the
emissions on the vehicle thatyou'll be using, and really understanding the taximplications to then choose what is best for you. some employees, particularlywhen they join a new company, they're not totally sure thatit's going to work out. they're loathed to lease a caror purchase a car until they know that things are going towork out with their employer. in that case, whatwe'd recommend is short term car hire.
most car hire companies dovery favourable rates on three, six month hire rates, andit can be that buffer to ensure that you're going to behappy in the role before you go to the cost of eitherpurchasing a care or undertaking and committingto a car lease. so what is right for you-- acompany car, a company car allowance, or a mileageallowance? you really need to make thatdecision, and i would recommend sitting down with asheet of paper, weighing up
the different options based onthe approximate business mileage that you're going to bedoing, the mileage that is paid by the employer, andactually doing a rough sum to the tax implications and whetherit is going to be of benefit to opt for the companycar, which of course is stress-free, or to opt for acompany car allowance where you'll also have a bitmore choice on the car that you drive.