Pool Cars VAT & PAYE

Pool Cars, VAT & PAYE

Are you considering claiming the advantageous Pool Car treatment instead of of regarding it as a Company Car?  If so please be aware of the following rules.

Pool Cars & VAT

If only one person uses a pool car it isn’t a pool car and no VAT is recoverable.

In order to be a pool car for VAT purposes HMRC say:

3.7 VAT incurred when you buy a pool car

You can recover the VAT incurred as long as it’s:

  • normally kept at the principal place of business
  • not allocated to an individual
  • not kept at an employee’s home

Click to read HMRC VAT guidance

Pool Cars & PAYE

Pool cars have wider implications and also need to comply with these rules deriving from the PAYE manuals:

Sections 167 and 168 ITEPA 2003 ensure that no car or van benefit arises on a pooled car or van made available by reason of the employment that, in the relevant tax year, satisfies all the following conditions:

  1. it was made available to, and actually used by, more than one of those employees
  2. it was made available, in the case of each of those employees, by reason of the employee’s employment
  3. it was not ordinarily used by one of those employees to the exclusion of the others
  4. in the case of each of those employees, any private use of it made by the employee was merely incidental to the employee’s other use of it in that year (see EIM23455), and
  5. it was not normally kept overnight on or in the vicinity of any residential premises where any of the employees was residing, except while being kept overnight on premises occupied by the person making it available to them (see EIM23465).

For the purpose of these five conditions all employees should be considered, including those in excluded employments, who would not be chargeable to tax even if the car or van were available for their private use.

Click here to read HMRC PAYE guidance

What if usage changes? (i.e. it was a Pool Car but is now a Company Car)

3.10 Changing the use of a car

If you recover VAT on a car because of one of the exceptions in paragraph 3.1, but later put the car to a use that would not qualify for recovery under any of the exceptions a ‘self supply’ occurs.

A ‘self supply’ means that you must account for output tax at the time of the change of use on the current value of the car. You can take the current purchase price of an identical car or, if this is not available, of a similar car as the current value.

Click here for further HMRC reading

If you would like to discuss the wider implications please contact us:

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