The Difference Between A Company Car, Private Car And Commercial Vehicle
It is important to understand the difference between vehicles, whether they are company owned, private vehicles or commercial.
A company car can be given to an employee as part of their job role. If the employee uses the car privately, including commuting, a benefit-in-kind (BIK) charge is applied as a ‘cash equivalent value’ onto the employee’s taxable earnings.
A company car is expensed in two main ways – ‘Mileage Claim’ or ‘Fuel Benefit’.
A Mileage Claim system is when the business pays for business fuel on business trips and the employee pays for private fuel on private trips. A mileage claim system requires detailed mileage logs for all business trips.
A Fuel Benefit system is used if the business pays for all fuel in the car; business and private. No mileage logs are required but an additional fuel benefit-in-kind (FBIK) charge is applied.
Read article: Are you better with or without Fuel Benefit-In-Kind?
Private vehicles which are used for business trips are often referred to as ‘grey fleet’. When using a grey fleet car no benefit charges are levied against the car or the fuel for either the business or employee.
Grey fleets are a cost-effective solution for companies where business mileage is typically low. Grey fleets are most commonly on a mileage claim system - so a detailed mileage log is required.
A light commercial vehicles (LCV) definition is any motorised vehicle other than a car or motorcycle that weighs less than 3500kg. Some examples are:
- Pick-up truck
- Car derived van
The majority of LCV’s register a nil-benefit, therefore, only business trips, commuting and insignificant private use are allowed.
If significant private trips are undertaken, this must be declared and a BIK charge applied.
If the business pays for the fuel on private trips, this must be declared and a FBIK is applied.
Mileage logs are required for nil-benefit and BIK systems. No mileage logs are required on a FBIK system.
If a business fails to declare BIK or FBIK on LCV’s they risk heavy tax penalties backdated up to 6 years.
It's not easy for an individual to keep track of all the Tax Authority's rules and requirements. That is why at ABAX we are always updated with the latest regulations - so you can avoid worrying about your taxes.
Read article: Company Van On Benefit-In-Kind (BIK)
How do I fill out a mileage claim?
The ABAX Triplog is a GPS unit, permanently connected with our servers, which automatically keeps track of all driving.
This means that it is always updated with the latest software, the latest tax regulations and a user-friendly interface that gives you immediate access to all this information. Our additional services include storage for seven years of all data - the minimum legal requirement by the Tax Authority.
Find out about ABAX Mileage Claim here.