A company car is a benefit enjoyed by many. Not only does it give the driver access to the latest technological innovations, it also means they don’t need to worry about costs such as insurance or maintenance, as these are generally covered by the employer. However, because the car is provided by the employer, the company car driver will be subject to benefit-in-kind tax.
There’s much more than just purchase or lease costs to consider for your next fleet vehicle – servicing, finance costs, car residual values and more all play an important role. Total cost of ownership pulls all of these costs together to give you a full picture.
With a range of acronyms, calculations and percentages involved, it can be hard keeping on top of company car tax and understanding what it means for your business.
A P11D is a form an employer is required to complete to declare to HMRC any non-monetary benefits they provide to their employees each tax year.
Non-monetary benefits include any company car that is available for private use.
To declare what a company car is worth to employees for tax purposes, you need to know its P11D value. The P11D value is not the amount your business pays for a company vehicle.
To calculate the P11D value of a company car:
1. Find the manufacturer’s on-the-road price the day before the car was registered
2. Subtract first-year Vehicle Excise Duty
3. Subtract the registration fee for new cars (currently £55)
4. Add the list price of any optional extras (including VAT).
If your company receives a plug-in car grant, this should not be subtracted.
Any amount your business pays for private fuel must be reported.
Low emission cars: good for the business and the environment
From lower operating costs to staff retention to helping you meet your environmental targets, CO2 emissions can have a big impact on your business.
To encourage the use of low emission cars, the government uses CO2 to determine a number of factors that directly affect the cost of fleet vehicles.
CO2 emissions from company cars can affect:
Emissions standards for fleet vehicles are changing.
From September 2019, all new cars registered in UK will be subject to a mandatory road-based emissions test. The test, which was introduced in September 2017, is known as The Real Driving Emissions test (RDE).
RDE is performed on the road and is designed to ensure consistency between laboratory testing and data collected under real-world conditions.
How will fleet vehicles be affected?
From September 2019 the first phase (RDE1) is mandatory and new petrol and diesel cars are required to emit no more than 2.1 times the maximum amount of NOx allowed under laboratory testing.
The current limit is 126mg/km for petrol and 168mg/km for diesel models.
From January 2020, this will reduce further to a maximum of 90mg/km for petrol and 120mg/km for diesel models.
If fleet vehicles fail to meet the new standard, the financial penalties are:
What is Grey Fleet?
Grey Fleet is where employees are allowed to drive their own (private) vehicle for work purposes (excluding commuting to and from their regular place of work). Any driver that takes a cash allowance rather than a company car is also a Grey Fleet driver.
Duty of care
While having Grey Fleet drivers can be more beneficial for businesses that do not incur many business miles annually, employees using their own vehicles for business journeys does not absolve the company or the fleet manager from their duty of care responsibilities.
Grey fleet drivers can be hard to manage in respect of mileage, accident management and general vehicle maintenance. Duty of care responsibilities both towards employees who are required to drive as part of their job is also another area of increasing government focus.
These issues increase both the administrative burden and the risks associated with running a grey fleet. According to, accountancy software provider, Concur, 41% of employees' expenses claims are submitted without a receipt and, therefore, the VAT is unrecoverable
Grey Fleet employer responsibilities
Employers owe the same duty of care under Health and Safety law to staff who drive their own vehicles for work as they do to employees who drive company owned fleet vehicles, leased or hired vehicles.
Employers, therefore, must: