October 29th, 2012 / Insight posted in

Can my firm pay for my son’s car?

DD writes: My eldest son has just passed his driving test and I am considering buying him a car and insuring it through my small family business to obtain a cheaper premium. Is there any reason why I can not do this, and what are the tax implications?

In theory there is nothing to stop your family business buying a car for your son, but this will result in you having a benefit-in-kind tax charge for the vehicle, writes Chris Lane, a partner at Kingston Smith LLP.

The benefit-in-kind charge will arise even if your son is not an employee. It will be calculated as normal, on the basis of the original list price multiplied by a percentage based on the car’s carbon dioxide emissions. This benefit will then be entered on your P11D form at the end of the tax year.

If you are looking to get him an electric car, the percentage charge will be nil and there will be no tax to pay, but that depends on whether your son wants an electric car.

In terms of the insurance premium and any other costs associated with the car, these would still be considered allowable business expenses for corporation tax purposes if they are to be considered to be part of your overall remuneration package.

Finally, check your policy or contact your business’s insurance company to make sure that non-employees are allowed to drive company vehicles.