How do we prevent a pool car or van from being taxed as a company vehicle?

Wednesday, June 30th, 2010

If a pool car or van, otherwise called a “pooled” car or van by HMRC, meets the statutory conditions, it is not treated as a company vehicle. As a result, the drivers using the vehicle are not liable for the car or van benefit and fuel charges. Meeting the conditions is therefore critical.

In the following notes, references to a “pool car” apply equally to a pool van.

A car is a pool car if, during a tax year, it has been included in a car pool and all of the following conditions are met:

  1. the car was used by two or more employees, be reason of their employment
  2. the car was not ordinarily used by one of those employees to the “exclusion of the others”
  3. any private use of the car made by each of the employees was “merely incidental” to each employee’s other use of the car in that year, and
  4. the car was “not normally kept overnight” at or near any of the employees’ homes (other than at the employer’s premises).

Notice that these are tests of whether a car is a pool car, not whether an employee is using it as a pool car. The starting point is whether the car itself meets the conditions. If one of the conditions is not met, e.g. the car is regularly kept at one of the employee’s homes, the car is not a pool car and, as a result, any private use of the car creates a tax liability, not just for that employee, but for all of the other employees who use the car. Employers must ensure that, once a car is designated a pool car, that it is used strictly for that purpose and no other.

The following notes explain the implications of the special terms used in the legislation.

“exclusion of the others”

This term, used in condition 2 means that the car, while it is a pool car, cannot have a principal driver. The fact that the car may also have been a company car for part of the tax year and, during that time, it had a principal driver does not prevent it from being a pool car, as long as that driver is not one of the drivers now using it as a pool car.

“merely incidental”

The term “merely incidental” is not defined in legislation and HMRC has published Statement of Practice SP2/96 Pooled cars: Incidental private use to provide guidance on whether any private use of a pool car is ‘merely incidental to’ the business use of the car.

This term, in condition 3, imposes a qualitative test. It refers to the nature of the private use, not the distance covered. The private use of a pool car can only be “merely incidental” to its business use if the private use follows from the business use, i.e. for there to be private use, the car must be used on the same occasion for business use as well. Examples are taking the car home on the evening before a business trip (but see the “not normally kept overnight” rule below) and using the car to go to a nearby restaurant in an evening while away on business. It would be sensible to keep detailed mileage logs for pool cars, showing separately the business journeys and the “incidental” journeys, and also to record the employee’s manager’s authorisation for the use of the car.

A non-statutory concession also provides that, where the private use of a pool car is not “merely incidental”, such use may also be ignored if it is small in extent and infrequent, and is

  • provided on compassionate grounds to meet the immediate need for transport in an emergency situation, e.g. an employee learns that a family member has been involved in an accident, and/or
  • incidental to the provision of another benefit that does not itself give rise to a tax charge, e.g. transporting sports equipment to a sports facility that the employer provides for the workforce in general.

Where a chauffeur takes a pool car home overnight, the private journey does not of itself disqualify the car from treatment as a pool car if the chauffeur’s duties require it in order to collect or deliver passengers from different locations. However, a car would cease to qualify as a pool car if the chauffeur used it, for example, at weekends or for holidays.

“not normally kept overnight”

This term, in condition 4, is not defined quantitatively in the legislation. HMRC accepts that a car is “not normally kept overnight” at or near the homes of all the employees who use it if this does not happen for more than 60% of the year, usually taken to be 219 days. This rule is for guidance only and has no statutory basis. On the other hand, if the car were kept overnight at the home of one employee for less than 60% of the year, that level of work to home journeys would fail to satisfy the “merely incidental” test.

If a pool car is made available to employees at weekends or for their holidays, the full car benefit and fuel benefit, if appropriate, applies for the period the car was available. The employee could pay towards the private usage and thus reduce the tax charge to nil, but the benefit would still have to be reported on the P11D as a company car.

A similar caution applies where a pool car is taken home at night because there is inadequate parking or security at the company’s premises, or where an unallocated car is temporarily looked after at night by an employee who is not entitled to a company car. These situations would fail the “not normally kept overnight” test and the car would thus become a company car with a taxable charge.

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8 comments on “How do we prevent a pool car or van from being taxed as a company vehicle?”

  1. […] Tax (Earnings and Pensions) Act 2003.  A full description of the conditions and how they apply are available in one of our Employer FAQs.  This article […]

  2. What if the business is based at a directord home address and 4 people use the car equally or roughly equally ?


  3. Ian Holloway says:


    The only stumbling block is that it does fall foul of one of the fundamental rules of defining a pool car, i.e. that it is not normally left overnight at a home address. However, I believe that this is changed if the actual business is based at that address. In these circumstances, I believe that it would meet the definition of a pool car.

    However, with HMRC it is always best to get everything confirmed. Therefore, I would advise that you make contact with them, explain that the car is certainly a pool car, however, because the business is based at home, it is likely that the car will be left there. However, in reality, this is just leaving the pool car at the office, its just the office is at home.

    I hope this helps. Kind regards,

    Ian Holloway
    The Learn Centre

  4. Hello, I know is late to comment on this now, but this happened to me with HMRC. I run my business from home but they insisted that the companies delivery vehicle was not a pooled vehicle because it was kept at my home address. They tried to get or should I say extort, nearly £20,0000 from me. I stood my ground and said I would see them at the “Special commissioners” after keeping me waiting for 2 years , yes i did say 2 years, they backed off saying they did not want to set any precedence. I will let you decide what their thoughts were on the issue, but it was very clear to me they were just trying it on.

    Even now iam trying to get someone in authority in Government to confirm that condition 5 (e) of the legislation does as you suggest allows for the vehicle to be kept at the residential address if the person making it available ie owner of the business also resides there.


  5. Ronan Turley says:

    Just need a bit of clarity if someone can help.
    There is 3 staff who do on call continually therefore car is away from HQ 100% of the time. Therefore should fall into the pool car category.

    Car however is used by at least 6 people during the day but yet the 3 staff that use the car from home to work while on call share the total C02 tax divided by 3. Looks like tax man make money at the expense of the 3 of us.
    Any suggestions.

  6. Ian Holloway says:


    This is the definition of a pool car from HMRC’s Website: was made available to, and actually used by, more than one of those employees was made available, in the case of each of those employees, by reason of the employee’s employment was not ordinarily used by one of those employees to the exclusion of the others 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 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

    Further, it says:
    You can accept that a car is not normally kept overnight at employees’ homes if the total number of nights on which it is taken home by employees, for whatever reason, is less than 60% of the total number of nights in the period under review.

    It sounds as though your employer has made the decision to not regard this as a pool car as it does not meet all of the 5 tests. I think that I would agree with this decision and the car is a company car and a benefit to you. The benefit has to be split between the three employees that use the car from home to work and the law says that the benefit can only be reduced if the car was unavailable for use for 30 days or more. However, it does seem unfair, I grant you, that other people are using your company car and the law regards it as a pool car for them.

    I am not sure what your employer could do in this instance. They have acted quite properly and in accordance with the legislation. You could make a claim to HMRC appealing the way that the benefit has been appropriated but I am not sure where you would get. You could change the arrangements for where it is kept overnight, therefore, making the car fall into the pool car category, however, this defeats the object of having the car for home to work travel.

    Sorry I cannot provide any workable suggestions.

    Kind regards,


  7. I understand from comments above that a car kept at the home of a business owner, might be considered a pool car if the business is based at the employer’s home. What about the situation when an employee’s official place of business is “their home”. Could a car provided for them be similarly treated as a pool car so long as it met the other criteria?

  8. Ian Holloway says:


    This is an interesting scenario and probably one that we should be considering more given the rise in the number of homeworkers.

    I do not see any reason why this particular section in ITEPA 2003 (section 167(3e)) should be compromised if it is a contractual fact that the employee’s place of business is his home. I think it may be more difficult (but not impossible) to prove to HMRC that the private use of it was incidental to the business use. I suggest that this would require the employee to always have another car available for private use.

    The difficultly is always convincing HMRC that a car is actually a pool car and this requires detailed record-keeping to act as a defence in the circumstance that they say it is a company car.

    As I said, interesting comment.

    Kind regards,

    Ian Holloway

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