A company car is a vehicle that is provided by an employer to an employee for business and personal use. The employer typically bears the costs of purchasing, registering, insuring, and maintaining the vehicle. The employee is typically required to pay personal income tax on the value of the vehicle as part of their salary or wages.
Employer: why should you provide your employees with a company car?
As an employer, providing a company car to employees offers some benefits, including:
- Attracting and retaining talent
A company car can be a valuable benefit that can attract and retain high-quality employees.
- Increased productivity
Providing a company car to employees can make it easier for them to carry out their work duties and responsibilities, allowing them to be more productive and efficient.
- Improved brand image
A company car can improve the image of the employer, helping to build brand recognition and demonstrate the company's commitment to its employees.
- Tax benefits
Providing a company car can be tax-deductible as a business expense, which can help to reduce the overall tax burden for the employer.
Employer: consider these risks before providing a company car to your employees
Keep in mind that, as an employer, providing company cars involves significant costs, as well as some risks and administrative overhead:
- Cost of vehicle ownership
You as employer must bear the cost of purchasing, registering, insuring, and maintaining the vehicle. This is regardless whether you purchase or lease the vehicle.
- Responsibility for accidents
If an employee is involved in an accident while driving the company car, the employer may be held liable for damages and medical expenses.
- Complex tax laws
As an employer you must comply with tax laws and regulations related to the provision of a company car, including determining the taxable value of the benefit and reporting it to the tax authority.
- Record-keeping requirements
The employer must ensure that the employee keeps accurate records of the business use of the company car, in the form of a mileage logbook.
- Monitoring employee use
The employer must ensure that employees are using the company car appropriately and only for work-related purposes, which may require additional management time and resources.
Providing a company car to employees can have many benefits, but it also involves significant costs, risks, and overhead for the employer. As an employer, you should carefully consider the specific needs of the business and its employees before making a decision on whether to provide a company car.