Company Car Tax Question

[CarlT]

Sorry for the boring question, but can anyone on PH help with the following:

I currently have a job with a co. car and fuel card and pay extortionate tax on both. I have been offered a new job where I am given a loan (that I never pay) for a company car that is registered in my name and I keep for 3 months and then change. I am led to believe that I only pay tax on the interest on the loan ? Can someone confirm / put this into basic english for me ? What sort of tax value would this be - based on a £15K car!
I have tried the HMRC website, but it is no clearer !
Thanks in advance

[eyebeebe]

CarlT said:

Sorry for the boring question, but can anyone on PH help with the following:

I currently have a job with a co. car and fuel card and pay extortionate tax on both. I have been offered a new job where I am given a loan (that I never pay) for a company car that is registered in my name and I keep for 3 months and then change. I am led to believe that I only pay tax on the interest on the loan ? Can someone confirm / put this into basic english for me ? What sort of tax value would this be - based on a £15K car!
I have tried the HMRC website, but it is no clearer !
Thanks in advance

This may help?

www.cartax.co.uk/

[eyebeebe]

CarlT said:

Sorry for the boring question, but can anyone on PH help with the following:

I currently have a job with a co. car and fuel card and pay extortionate tax on both. I have been offered a new job where I am given a loan (that I never pay) for a company car that is registered in my name and I keep for 3 months and then change. I am led to believe that I only pay tax on the interest on the loan ? Can someone confirm / put this into basic english for me ? What sort of tax value would this be - based on a £15K car!
I have tried the HMRC website, but it is no clearer !
Thanks in advance

This may help?

www.cartax.co.uk/

[Philbes]

A loan you never repay is a lump sum payment and hence will be taxed as if it is salary - unless your employer is prepared to lie to the tax man.

[Eric Mc]

This Government is expert on loans that aren't genuine loans.

Yep, giving you monry to buy a car means the cash will be taxed in full - end of story.

[SKR]

I do know of a car manufacture that runs a similar scheme for their staff.

From what I understand they sell you the car for £X and agree to buy it back for £X in 3-6 mths time. In order to finance all of this they give you a 0% interest loan deferring the first payment for 3-6 mths. The fact that the loan is 0% is deemed a benefit, making the interest you save taxable.

[RobDickinson]

Eric Mc said:

This Government is expert on loans that aren't genuine loans.

You mean you get a knighthood with the car too?

[Eric Mc]

No, you get a Princess - an Austin Princess.

[CaptainSlow]

SKR said:

I do know of a car manufacture that runs a similar scheme for their staff.

From what I understand they sell you the car for £X and agree to buy it back for £X in 3-6 mths time. In order to finance all of this they give you a 0% interest loan deferring the first payment for 3-6 mths. The fact that the loan is 0% is deemed a benefit, making the interest you save taxable.

This is correct. You do not pay any tax on the capital amount but you are taxed on the interest saving. The offical rate used by HMRC is currently 5% (www.hmrc.gov.uk/rates/interest-beneficial.htm) so if your's is 0% you will be taxed on the whole 5%. There is no employers' NI on this and I don't believe there is any employees NI but stand to be corrected on this.

Therefore a £15,000 car would be a BIK of £750 pa. Tax for a basic rate payer being £165 pa and higher rate payer being £300 pa.

You would then have to come to some arrangement for servicing, repairs and insurance etc which would be an additional cost.

Edited to add: these schemes have to be approved by HMRC prior to implementation.

Edited by CaptainSlow on Friday 9th February 16:41