Company car with fuel card

[toastybase]

Hi all, hopefully this is the most appropriate section to post.

My son has been in his current job for about 2 years now. He has a company car with a fuel card. He has been told by his boss that the car and card equates to £8000 in car allowance.

He is currently trying to negotiate a bonus and now that the figure of £8000 has been mentioned he is asking if it rings true compared to the car he has.

It’s a 2018 VW Passat 1.9ltr diesel with about 85,000 miles. The car is owned by the company owner and therefore it’s not salary sacrifice or leased.

Does the above sound about right? £8k for a 6 year old Passat sounds off to me.

Thanks
TB

[Exiled Imp]

You can check here

https://www.tax.service.gov.uk/guidance/work-out-c...

Company car benefit in kind is based on original (when new) list price, not current market value

[DorsetSparky]

toastybase said:

It’s a 2018 VW Passat 1.9ltr diesel ...Does the above sound about right?

Sorry for the pedant mode, but that's not right. A 2018 Passat would be a 2.0 TDI, not a 1.9 TDI! I'm aware that this isn't the crux of the question, but it's PH after all, so engines matter

[andburg]

A 6 year old Passat and fuel card £8000 a year? Benefit in kind value maybe as it’s taxed to the hilt being an older diesel, definitely not cost to the business.

That’s thing will be costing him probably double what a new one would be probably 20times what a new EV would.

[toastybase]

DorsetSparky said:

Sorry for the pedant mode, but that's not right. A 2018 Passat would be a 2.0 TDI, not a 1.9 TDI! I'm aware that this isn't the crux of the question, but it's PH after all, so engines matter

Apologies yes 1968cc

[toastybase]

andburg said:

A 6 year old Passat and fuel card £8000 a year? Benefit in kind value maybe as it’s taxed to the hilt being an older diesel, definitely not cost to the business.

That’s thing will be costing him probably double what a new one would be probably 20times what a new EV would.

Thanks and excuse the naive questions but I’ve never had a company car myself.

How would it be costing him anything? He has a base salary and is given a car with fuel card. Hi boss is making out that his base salary is effectively £8000 more due to having the car.

My son’s argument is that he reckons the type of car he has works out less than a £8000 per year add on to his salary.

[Muzzer79]

toastybase said:

My son’s argument is that he reckons the type of car he has works out less than a £8000 per year add on to his salary.

A company car as a concept is worth about £8k in terms of it being a benefit.

Whether a 6 year old Passat is a decent company car is another matter, but the provision of a car has a value.

[RayDonovan]

Total BIK would be about £8k, but the tax due should be around £1,600 @20% tax rate (give or take a little)

[PorkInsider]

toastybase said:

Thanks and excuse the naive questions but I’ve never had a company car myself.

How would it be costing him anything? He has a base salary and is given a car with fuel card. Hi boss is making out that his base salary is effectively £8000 more due to having the car.

My son’s argument is that he reckons the type of car he has works out less than a £8000 per year add on to his salary.

How would it be costing him anything?

Err, because he should be paying tax on it?

Is his employer effectivity saying it's not being declared, and that's why he's getting "£8,000 more due to having he car", as he's currently 'up' by the value of the use of a 'free' car PLUS what he should be paying in tax for it?

[StevieBee]

toastybase said:

How would it be costing him anything? He has a base salary and is given a car with fuel card. Hi boss is making out that his base salary is effectively £8000 more due to having the car.

The company is obliged to cover all vehicle costs for journeys related to business.

But unless he leaves the car at work each night, your son benefits from having a car that he has not purchased or contributes anything towards in terms of running costs. So the company is within its rights to assign a value that is proportional to the private use of the vehicle they have provided.

Whilst there are calculations that can be used to determine reasonable value, ultimately the company can assign whatever value they like and therefore comes down to negotiation when a job is offered or changes to the terms of employment or salary increases are incoming.

£8k does seem steep. Rough fag-packet calculation...I'd say financing a brand new version of the car would run at around £6k a year (repayment, fuel, Insurance, etc). So if he's using it half the time for work, then his liability should only be £3k. So, some room for negotiation.

The other cost is Benefit in Kind. When you have a company car, the government charges you tax on the proportion of the vehicle's cost that you would have essentially had to buy yourself from income on which income tax would have been paid. This is structured to disincentivise everyone running around in 5L V8 Mustang company cars.

[Sheepshanks]

RayDonovan said:

Total BIK would be about £8k, but the tax due should be around £1,600 @20% tax rate (give or take a little)

The car alone is around £8K in BIK.

Fuel benefit even more again. Having fully paid for fuel (so paying tax it) would be madness (unless doing very hefty private mileage).

Edited by Sheepshanks on Friday 1st November 07:46

[phil-sti]

so the company are uing the perceived value of the BIK as negotations in a paydeal?

Surely he is already paying the tax for the car BIK and fuel BIK?


I am no expert at all in company cars but:

The BIK is calculated for the car when new, i would not be happy to pay the comapny car tax on a 6 year passat as i'm sure its around 33% currently.

A car allowance is given on top of your salary for you to buy what you want but you fully fund it.

[RayDonovan]

Sheepshanks said:

RayDonovan said:

Total BIK would be about £8k, but the tax due should be around £1,600 @20% tax rate (give or take a little)

The car alone is around £8K in BIK.

Fuel benefit even more again. Having fully paid for fuel (so paying tax it) would be madness.

Depends how high his private mileage is. At 20% tax, a fuel card for some can be beneficial (I know one guy who used to do 35k/year private mileage)

[toastybase]

PorkInsider said:

toastybase said:

Thanks and excuse the naive questions but I’ve never had a company car myself.

How would it be costing him anything? He has a base salary and is given a car with fuel card. Hi boss is making out that his base salary is effectively £8000 more due to having the car.

My son’s argument is that he reckons the type of car he has works out less than a £8000 per year add on to his salary.

How would it be costing him anything?

Err, because he should be paying tax on it?

Is his employer effectivity saying it's not being declared, and that's why he's getting "£8,000 more due to having he car", as he's currently 'up' by the value of the use of a 'free' car PLUS what he should be paying in tax for it?

Yes agree. That is my next question as obviously he needs to ensure his tax is up to date however I wanted to start with working out what’s going on with his car vs. Salary.

In essence what you’ve described above seems to be correct.

For example his contract states a salary is around £60k with an OTE of £90k. The issue is rather than calculate the commission (no commission structure was in place) his boss is willing to negotiate a bonus. Boss reckons he’s effectively on £70kish basic due to the car.


Edited to add. The main aim of this is to understand clearly what his liabilities are in regards to tax and where his standing point is with a basic salary. If it means that a large amount is due in tax then he will need (imo) to make a choice to give the car back and take the train into work etc or I can give him a lift on some days.


It’s a decent salary however most of it goes on his mortgage

Edited by toastybase on Friday 1st November 08:32

[Sheepshanks]

RayDonovan said:

Depends how high his private mileage is. At 20% tax, a fuel card for some can be beneficial (I know one guy who used to do 35k/year private mileage)

I edited my post as you posted - yes, I used to work with someone who did a 600 mile round trip every weekend to his in-laws. BIK was lower then but his tax was 40%. We didn’t have a choice, so the increasing BIK was used to ‘force’ people to opt out of company cars and take an allowance instead.

[andburg]

toastybase said:

Edited to add. The main aim of this is to understand clearly what his liabilities are in regards to tax and where his standing point is with a basic salary. If it means that a large amount is due in tax then he will need (imo) to make a choice to give the car back and take the train into work etc or I can give him a lift on some days.

Question is really, are they doing it properly or is it off book?

Assuming its an SE Business Bluemotion (pretty much the cheapest)

https://comcar.co.uk/companycar/tax/history/calcul...

Cost in tax with fuel to a 40% taxpayer making 60k a year
£575.63per month
£6,907.50per year

Absolutely murderous for a rpoperly declared car with private useage and fuel. A 2 year old passat GTE would halve that tax bill

[RayDonovan]

100% it's off the books.

[Muzzer79]

toastybase said:

For example his contract states a salary is around £60k with an OTE of £90k. The issue is rather than calculate the commission (no commission structure was in place) his boss is willing to negotiate a bonus. Boss reckons he’s effectively on £70kish basic due to the car.

This has become quite opaque

1. Does his contract stipulate that he is provided with a company car?

2. Does he need a car for work, or is the car just a 'perk'?

3. How can he be on OTE £90k with no commission structure in place??

4. Does he currently pay BIK on the car? This should be fairly obvious from his payslip.

If his boss has given him a car off the books, he should be looking for another job.

[Dynion Araf Uchaf]

a company car is not a perk, if it is required for his work - i.e he travels about a lot because he's a travelling salesman.

If it's not required for work, I'd hand it back and take the cash equivalent - 8K.

[Sheepshanks]

toastybase said:

For example his contract states a salary is around £60k with an OTE of £90k. The issue is rather than calculate the commission (no commission structure was in place) his boss is willing to negotiate a bonus. Boss reckons he’s effectively on £70kish basic due to the car.


Edited to add. The main aim of this is to understand clearly what his liabilities are in regards to tax and where his standing point is with a basic salary. If it means that a large amount is due in tax then he will need (imo) to make a choice to give the car back and take the train into work etc or I can give him a lift on some days.

What kind of job does he do that's office based with an OTE of £90K?

You'd think someone with that potential would have a reasonable commercial / business mind and so would be able to figure out how much he earned and how much his tax was going to be. Having said, my son-in-law has a well paid job and it was only when he and our daughter applied for a mortgage that it became apparent he'd been on a Basic Rate tax code (so had no personal allowance applied) for 5yrs. He got quite a nice tax rebate.