Cars and fleet – definition – Employee car ownership scheme

As the cash alternative to contract car hire and outright purchase, an employee car ownership scheme allows an employee to spend a certain amount of cash, determined by their employer, on a car of their choice through monthly payments.

The employee signs a contract with a car leasing company to purchase the vehicle over a set period and mileage. Typical agreements run for two or three years and include servicing, maintenance, road tax, breakdown recovery and insurance with the provider committing to buying the vehicle back at the time of the final instalment.

Employees are often given the option of buying the vehicle at the end of the agreement but, with an eye on corporate responsibility, this should be done on the understanding that the vehicle is used as a second car rather than for business.

The tax rules that apply are quite complex, but employees using these employee care ownership schemes are exempt from company car benefit-in-kind tax as the title of the vehicle passes to the driver under a credit-sale agreement. Employee car ownership drivers also qualify for HM Revenue & Customs approved mileage allowance payments scheme (Amaps).

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