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Site FAQs
My employer provides me with a fuel card which covers my private mileage - what implications does this have?
Do the calculations include vehicle insurance?
Can I save my information for a future visit?
I do not understand the saving / costs figure you provide on the website
Why do I need to input my proposed company car?
Is CO2 included in your calculations?
How do I claim my business mileage?
How should I keep track of my business mileage?
Your monthly budget takes into account the net cash alternative and the Mileage Allowance Relief (MAR) on mileage underpaid by employer. Would not the HM Revenue & Customs net off the net cash alternative before allowing the tax credit?
Tax FAQs
What are 'business miles'?
What amount do I pay tax on?
How is my tax on a company car collected?
Who pays Class 1A National Insurance contributions?
How are my employer's Class 1A NICs collected?
What information does my employer have to provide to the HM Revenue & Customs?
What is a company car?
Using your own car for business travel, and how it affects your tax
What if I am paid a car or mileage allowance?
What if I am not paid a car or mileage allowance?
Keeping a record of your allowances and your business travel
What journeys qualify as business travel?
What information should I give the HM Revenue & Customs?
If you receive a tax return
If you do not receive a tax return
Tax year
HM Revenue & Customs Form P11D
Form P11D vehicle price limit
What are Approved Mileage Allowance Payments (AMAP)?
PCP FAQs
What kind of car should I choose?
What is Personal Contract Purchase ("PCP")?
Why Personal Contract Purchase ("PCP")?
How does a Personal Contract Purchase ("PCP") work?
Balloon Payment
Guaranteed Minimum Future Value ("GMFV")
Maintenance
Residual Value
Personal Contract Purchase ("PCP") At A Glance
Is maintenance included in my contract?
Can I maintain the car myself?
My company car is hassle free. Will there be an additional administrative burden with my new Personal Contract Purchase ("PCP") car?
What happens if I do more miles than I am contracted for?
What happens if I do fewer miles than I am contracted for?
Who owns the car?
What happens at the end of the contract?
I am happy with my company car; why do I need to change?
Gap or Shortfall Insurance
How much can I borrow?
How are the monthly payments collected?
What length of agreements are available?
Do I have to forecast my annual mileage?
What about the Graduated Vehicle Excise Duty (GVED)?
What about Insurance?
What about VAT?
What types of agreements do I have to sign?
I can't find the car I am looking to purchase on Cash or Car?, what do I do?
What happens if I decide to rejoin my company car scheme half way through the PCP?
If I decide not to buy the car at the end of the PCP, what extra costs are involved if any?
Site FAQs
My employer provides me with a fuel card which covers my private mileage, what implications does this have?
The implications of fuel card provision are dealt with by selecting the Fuel Card option on the Employer Mileage Allowance page.
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Do the calculations include vehicle insurance?
Our monthly budget calculations include the cost of vehicle insurance. This is achieved by incorporating indicative quotations from our featured insurer 'insuremythings.com'. These quotations are based on the assumption that the you will be eligible for a 60% no claims discount. This discount can be obtained by providing a letter from your employer confirming that you have not had an accident in the last 3 years where you were at fault.
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Can I save my information for a future visit?
Yes, once you have answered all the questions you will be presented with a personal summary of your answers, at this point you will be able to save your details for a future visit.
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I do not understand the saving / (costs) figure you provide on the website.
Your saving / (cost) is simply the difference between your monthly budget and your monthly PCP payments. However, the monthly budget figure is a complex calculation made up of the following elements:
• Net cash alternative;
• Mileage allowance;
• Company car tax saving;
• Private fuel tax saving (if applicable);
• Mileage Allowance Relief (MAR);
• Insurance cost;
• Private fuel cost (if applicable);
• Business fuel cost; and
• Graduated Vehicle Excise Duty (GVED) (year 2 onwards).
Your Budget will vary from vehicle to vehicle because figures such as insurance and fuel costs will differ.
You can click on the monthly budget value on the website to see how it is calculated and then also click on its components to see how they in turn are calculated. This will allow you to examine every detail of the calculations presented.
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Why do I need to input my proposed company car?
In order to accurately calculate your saving / (costs) it is important that we know your proposed company car. This will allow us to base all the website's calculations from your chosen vehicle.
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Your monthly budget takes into account the net cash alternative and for the Mileage Allowance Relief (MAR) on mileage underpaid by employer. Would not the HM Revenue & Customs net off the net cash alternative before allowing the tax credit?
On 'Cash or Car?' we have separated the income and expenditure elements into more easily comprehensible chunks.
Where an employee provides his own vehicle for business travel, it is common for the employer to pay not only for the cost of the petrol used, but also a contribution the running expenses and depreciation of the vehicle. The Revenue allow some of the running costs to be reimbursed to the employee without suffering tax or NI. The scheme is called Approved Mileage Allowance Payments (AMAP) (formerly called the Fixed Profit Car Scheme FPCS).
Since 6 April 1996 whether an employer operates an AMAP scheme or not, an employee can make use of the AMAP rules to claim a tax deduction for business usage of his/her private vehicle. The extent to which the AMAP rates exceed the amount received from the employer can be claimed as a tax deduction against the employee's taxable income.
This claim can be used if the employee does not receive a self-assessment return. If the employee does then such a claim should still be used in support of the claim as an attachment to the return.
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Is CO2 included in your calculations?
CO2was incorporated into the 'Cash or Car?' website a few days after the 17th April 2000 Budget. To locate the calculations you will need to click on the monthly saving figure and then follow the appropriate links to see the information.
The Reference Data section also contains useful information on how vehicle CO2 emissions will effect company car taxation. CO2 was incorporated in the 'Cash or Car?' website a few days after the April 2000 Budget.
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How do I claim my business mileage?
Your company will have an expense procedure which you should follow, please contact your HR department for full details.
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How should I keep track of my business mileage?
You should keep a log of all mileage, business or private. This will then help at the end of the financial year when completing your tax return and for claiming expenses from your company.
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Tax FAQs
What are 'business miles'?
Business miles are driven on two types of journeys:
(a) those employees have to make in the performance of their duties; and
(b) those employees make to or from a place they have to attend in the performance of their duties - as long as the journeys are not ordinary commuting or private travel.
'Ordinary commuting' is a journey between an employee's home and his or her permanent place of work.
Detailed guidance on the types of journey which count as business journeys is contained in the HM Revenue & Customs’s Booklet 490, 'Employee Travel - A tax and NIC Guide for Employers'. (http://www.inlandrevenue.gov.uk)
Ask your Tax Office for advice if you need to know about the different rules which applied before 6 April 1998.
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What amount do I pay tax on?
When you have worked out the price of the car for tax purposes, you can calculate the amount of the taxable car benefit. To do this, you need to know
• the CO2 emissions of your company car;
• whether you were required to pay for private use of the car.
You must take each of these items into account in the order set out above when doing your calculation.
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How is my tax on a company car collected?
The tax will normally be collected through your PAYE code or by an adjustment after the end of the tax year, or both.
Under PAYE (Pay As You Earn), tax is deducted from your income by means of codes and tax tables which are designed, as far as possible, to ensure that the correct amount of tax is deducted during the tax year without the need for an assessment at the end of the year. The PAYE code is made up of personal allowances and other relief due, less any amounts to cover taxable income, such as a company car and other benefits in kind, to which PAYE cannot be applied.
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Your employer normally provides information about your benefits in kind, including company cars, to the Tax Office so that their PAYE codes can be worked out, but you must still include details of those benefits on their tax return if they are asked to complete one.
Who pays Class 1A National Insurance contributions?
Only employers normally pay Class 1A National Insurance contributions (currently 11.8% in 2002/03 and will be increased by 1% to 12.8% in 2003/04). From 6 April 1991, as an employer, you may be liable to pay Class 1A National Insurance contributions for the cars you provide to:
• directors
• employees who are paid at a rate of £8,500 a year or more, including taxable benefits and
• expenses payments.
Normally, a Class 1A liability will arise where the benefit of the car is chargeable to income tax on the director or employee, and the employment for which the car is available is 'employed earner's employment' under Social Security law.
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How are my employer's Class 1A NICs collected?
Your employer may pay Class 1A NICs to the HM Revenue & Customs by electronic transfer directly to the Revenue's bank account or by using a special Class 1A payslip. Employers must pay Class 1A NICs due for the previous tax year by 19 July.
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What information does my employer have to provide to the HM Revenue & Customs?
To help HM Revenue & Customs to get your tax code correct, your employer must submit form P46 (car) to HMRC within 28 days from the end of the quarter to 5 July, 5 October, 5 January and 5 April, in which any of the following events take place:
• The employee/director is first provided with a car which is available for private use
• A car provided to the employee/director is replaced by another car which is available for private use
• The employee/director is provided with a second or further car which is available for private use
• A car provided to the employee/director is withdrawn and not replaced
• An employee/director provided with a car available for private use who was previously an employee earning less than £8,500 begins to earn in excess of this amount
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What is a company car?
It is a car made available by an employer (including a car provided under a leasing arrangement) for the private use of a director or employee, or a member of his or her family or household. Private use includes ordinary commuting journeys.
A car made available by a third party will also count as a company car if it is provided by reason of the employee's employment.
Motor cycles, invalid carriages, and vans or other commercial vehicles are not 'company cars'.
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Using your own car for business travel, and how it affects your tax
If you use your own car for business travel you can get Mileage Allowance Relief (MAR) for the costs that your employer does not meet.
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What if I am paid a car or mileage allowance?
Most employees who use their own cars to travel on business are paid a car or mileage allowance by their employer to cover some or all of the motoring costs. It can be in the form of a lump sum or periodic payments, but usually the allowance is based on an amount per mile.
If you are paid a car or mileage allowance, it is part of your income and is taxable to the extent that it exceeds your business motoring costs.
To work out your tax position you need to know whether the allowances you have received from your employer are more or less than the costs of your business motoring. If the allowances come to more than the costs, you have received a profit which is taxable. If the allowances come to less than the costs, you can get relief against your earnings on the difference.
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What if I am not paid a car or mileage allowance?
You can get relief against your earnings for your business motoring costs.
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Keeping a record of your allowances and your business travel
To work out if the car or mileage allowances you have received from your employer come to more or less than your business motoring costs, you first need to know what allowances you were paid during the tax year (a tax year runs from 6th April in one year to 5th April in the next) and your total business mileage during the year.
Your employer may give you this information, but not necessarily; it will depend on whether your employer has agreed special reporting arrangements with the HM Revenue & Customs for car and mileage allowances paid to employees.
It is important that you keep your own record of your allowances and your business mileage so you can:
• check your PAYE tax code.
• complete a tax return fully and accurately, if you get one.
• claim Mileage Allowance Relief (MAR) for travel expenses.
• answer any enquiries from your Tax Office.
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What journeys qualify as business travel?
Two types of journey count as business travel for Mileage Allowance Relief (MAR);
(i) those you have to make in the course of doing your job. For example, if you travel from your office to visit a client. If you use your own car, you can get Mileage Allowance Relief (MAR) for your motoring costs, to the extent that your employer does not meet them; and
(ii) those you make to or from a place you have to attend in order to do your job. This does not include private mileage, that is journeys which are ordinary commuting or private travel. For example, if, instead of going to your office, you travel directly from home to visit a client, that is business travel, for which you can get Mileage Allowance Relief (MAR) (unless the journey is, for practical purposes, the same as your ordinary commuting journey, because, say, the client's premises are just down the road from your office).
You cannot get Mileage Allowance Relief (MAR) for your ordinary commuting or for private travel.
'Ordinary commuting' is travel between your home, or any other place you attend for personal reasons (such as the home of a friend or relative) and your usual work place. 'Private travel' is any other travel where the purpose is not business.
If you are paid an allowance for any journey which is ordinary commuting or private travel, your employer should deduct tax from it under Pay As You Earn (PAYE).
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What information should I give the HM Revenue & Customs?
It depends on whether or not you get a tax return. See below.
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If you receive a tax return
You should decide which method you want to use to work out if you have a taxable profit on your car or mileage allowances or if you can get relief for business motoring costs. You can then enter the total in the employment pages in box 1.15 or 1.32 of your tax return, whichever is appropriate.
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If you do not receive a tax return
Your employer normally tells your Tax Office what car or mileage allowances you were paid in the tax year, and we will usually collect any tax that is due through your PAYE tax code.
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Tax year
In the United Kingdom ("UK"), the income tax year runs from 6 April to the following 5 April. This period is known as the "tax year" on this site. The current tax year is 2008/09, that is, 6 April 2008 to 5 April 2009.
HM Revenue & Customs Form P11D
Any employee who is allowed the private use of a company car is normally liable to income tax on the benefit. This applies whether or not the car is actually used for private motoring. A car is treated as being available for your private use if it is available for your own use or for the use of any member of your family or household. The car benefit charge is based on the list price of the car, known as the P11D value. This list price is used regardless of:
• How old the car was when you first had the use of it
• Whether the car was bought new or second hand by your employer
• Whether your employer paid the full list price or obtained a discount
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Form P11D vehicle price limit
The price of the car is subject to an upper limit of £80,000. If, therefore a car in fact has a price of £125,000, it is treated for tax purposes as if its price was £80,000.
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What are Approved Mileage Allowance Payments (AMAP)?
The HM Revenue & Customs allows your employer to pay you up to a certain level of business mileage reimbursement tax free. These rates, are known as the Approved Mileage Allowance Payments (AMAP), (formerly called the Fixed Profit Car Scheme). If your employer pays you less than these rates, you can claim Mileage Allowance Relief (MAR) on the difference at your marginal rate of tax.
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PCP FAQs
What kind of car should I choose?
The great thing about opting out of a company car scheme is that you have the freedom to choose which ever vehicle best suits your lifestyle. Some employers do place restrictions on your choice, i.e., the vehicle must be fit for its purpose and be capable of undertaking 5,000 business miles per annum (mileage may differ form company to company). It would be wise to contact your HR department to ascertain any restrictions prior to making any commitments.
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What is Personal Contract Purchase ("PCP")?
Personal Contract Purchase ("PCP") allows you, subject to credit checks, to purchase your own car on a no deposit cost-effective basis using the cash allowance offered to you by your employer. Under the PCP scheme, you will be able to buy a fully-maintained vehicle with a guaranteed value at the end of the contract period (24, 36 or 48 months). At the end of the contract, you can decide to pay the final payment and keep the car, or hand it back and choose a new car as you would with a company car. As you own the car, you will be protected from the changes to the taxation of company cars that were introduced with effect from 6 April 2002. For many company car drivers, these changes are likely to result in a significant increase in the cost of driving a company car as the current tax incentives for driving over 2,500 and 18,000 miles on business will disappear.
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Why Personal Contract Purchase ("PCP")?
Company cars are no longer the perk they once were as a result of rising taxation. From 6th April 2002, the Government introduced a system of taxing company car users based on the level of carbon dioxide ("CO2") emissions. The company car therefore may not represent 'best value for money' for all employees.
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How does a Personal Contract Purchase ("PCP") work?
It is a funding package based on a hire purchase agreement, combined with options to offset some of the risks associated with running a car. You purchase your choice of vehicle via a series of equal monthly payments, comprising capital repayment and interest. You do not even need to put down a deposit, although doing so will reduce your monthly payments. No VAT is imposed on the monthly payments, but additional services such as maintenance are subject to VAT. Your payments will be linked to an optional final balloon payment, equivalent to the estimated residual value. If you think the vehicle is worth more than the estimated residual value, or you wish to retain the vehicle, you can pay the final payment, after which the legal title of ownership of the vehicle passes to you. You can then keep or sell the vehicle as you wish. Alternatively, if you do not wish to continue to own the vehicle, or you would like to purchase a new vehicle, you can exercise your option to sell the vehicle to the leasing company at the previously agreed value.
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Balloon Payment
This is the optional final payment at the end of your contract which gives you the choice of owning the car upon payment of a predetermined figure. This payment is equal to the Guaranteed Minimum Future Value ("GMFV").
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Guaranteed Minimum Future Value ("GMFV")
Instead of paying off the whole loan over the term, some of it is deferred. This amount - the guaranteed minimum future value ("GMFV") - is set at the outset. This value is the balloon payment. It relates to a given annual mileage. You pay interest on the whole loan, but because you are only paying off part of it, monthly repayments are lower with a PCP than under traditional hire purchase. When your monthly repayments have finished you have several options. You can choose to pay the balloon payment (equal to the GMFV) and keep the car, or hand it back and walk away.
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Maintenance
One of the most unpredictable aspects of running a car is servicing and maintenance expenditure. The leasing company offers a comprehensive maintenance package for your chosen car, allowing you to spread the cost of maintaining your vehicle over its contract period through regular fixed monthly payments. This helps provide peace of mind by removing the unpredictability of those garage bills which always seem to arrive at the wrong time. The maintenance package includes servicing and maintenance for the life of the contract, including replacement tyres, batteries and exhausts, together with 24 hour European breakdown and recovery. This facility is particularly attractive to ex-company car drivers, who are familiar with the benefits of a fully maintained car for a fixed monthly payment.
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Residual Value
Your payments will be linked to an optional final balloon payment, equivalent to the estimated residual value. If you think the car is worth more than the estimated residual value, or you wish to retain ownership of the car, you can pay the final payment. You can then keep or sell the vehicle as you wish. Alternatively, if you do not wish to retain the vehicle, or you would like to purchase a new vehicle, you can return the vehicle to the leasing company.
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Personal Contract Purchase ("PCP") At A Glance
| Choice of any make and model |
Yes |
| Delivery to your home address |
Yes |
| Choice of 24, 36, or 48 month agreements |
Yes |
| No need for large deposits |
Yes |
| Guaranteed Minimum Future Value ("GMFV") |
Yes |
| Optional Maintenance Contract to include routine servicing,
maintenance and tyres |
Yes |
| 24 hour European breakdown and recovery |
Yes |
| Optional Gap Insurance |
Yes |
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Is maintenance included in my contract?
Within the Bank of Scotland Vehicle Finance facility you will have a maintenance contract included in your monthly payments. This will be identical to a company car maintenance coverage and will include all mechanical repairs, parts replacement including tyres, batteries and exhausts for breakdown or fair wear and tear. It would also include European breakdown recovery for the full period of the contract. The only elements not included in the maintenance budget are fuel, insurance and future road fund licences. We would recommend that you use one of the nominated Bank of Scotland Vehicle Finance premier repairing agents and Bank of Scotland Vehicle Finance will take you through all of the process of getting accounts opened with convenient local dealers.
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Can I maintain the car myself?
If you choose not to take the optional maintenance contract, you will need to maintain the car at a franchised dealer in accordance with the manufacturer's recommended service schedule. If the car's service history is incomplete, you will not be able to exercise your guaranteed buy back.
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My company car is hassle free.
Will there be an additional administrative burden with my new Personal Contract Purchase ("PCP") car?
The only difference from a day to day perspective will be that at the start of the contract you will be asked to sign contracts in your own name. However, from the date of delivery to the day that the vehicle is returned leasing company, you will have a minimal involvement and your only responsibility will be to keep the car licenced, in good condition and look after it in accordance with the manufacturer's schedules.
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What happens if I do more miles than I am contracted for?
If you do more miles than you anticipated initially there will be an excess mileage charge payable at the end of the contract.
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What happens if I do fewer miles than I am contracted for?
If you have done less miles than you have contracted to do, you will receive an additional benefit in that the value of the car may well be higher than the Guaranteed Minimum Future Value. You may then decide to pay the balloon payment at the end of the contract and keep the car.
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Who owns the car?
The car is registered in your name and belongs to you as soon as you sign the contract. However, if you wish to sell the car before the end of the contract period, you will have to settle the balance of the outstanding finance.
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What happens at the end of the contract?
At the end of the contract, you have two options:
(i) You can pay the final 'balloon' payment and keep the car
(ii) You can exercise your guaranteed buy-back agreement from the leasing company and return the car. Should you choose to return the car, then no further charges will be made, subject to the car not exceeding the forecasted mileage, and that it is returned in a condition that represents fair wear and tear for its age and mileage. Any excess mileage charges will also be applied at this time.
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I am happy with my company car; why do I need to change?
This scheme provides savings in P11D taxation. It may also provide you with more choice than you previously enjoyed and enables you to share any rewards of ownership from careful management of your car.
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Gap or Shortfall Insurance
Should your vehicle be stolen or written off, gap or shortfall insurance provides peace of mind throughout your PCP contract. It covers the risk of 'shortfall' between the insurance proceeds and the required PCP settlement figure. Gap Insurance is designed to pay the difference between the Insurer's settlement and any outstanding finance charges.
How long is the cover for? The full length of the finance agreement, up to a maximum of 48 months.
Is there a limit to the claims amount? Yes, claims are subject to a £4,000 limit.
How complex is the claims procedure? In the event of a total loss you must contact Bank of Scotland Vehicle Finance for a finance settlement figure and claim form. The Gap Insurance provider will then liaise directly with your motor insurers and Bank of Scotland Vehicle Finance.
How much will it cost? The cover is included free of charge.
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How much can I borrow?
You will be asked to complete a standard credit application and, subject to you meeting our terms, no other restrictions will be placed on you. However, you should always make sure that you can afford the regular monthly payment.
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How are the monthly payments collected?
All monthly payments after the 1st payment will be deducted by direct debit. You will need to sign a direct debit mandate for the payments to be collected.
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What length of agreements are available?
You can choose whether you would like to contract your new car for 24, 36 or 48 months.
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Do I have to forecast my annual mileage?
Yes, when requesting quotes you will have to forecast your annual mileage; the minimum mileage allowance is 10,000 miles. If you should exceed your mileage allowance, an excess mileage charge will become payable.
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What about the Graduated Vehicle Excise Duty (GVED)?
The road fund licence for the first year is included within the fixed monthly payments. However, because the car is registered in your name and belongs to you, as soon as you sign the contract, you will be responsible for re-licencing your car.
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What about Insurance?
The leasing company will require the car to be comprehensively insured for business use and will require proof on an annual basis. In order for the car to be registered to you and taxed they will require either the original cover note or certificate of insurance.
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What about VAT?
VAT is not payable on the finance element of the agreement though it is chargeable on the maintenance element and any other optional services at 17.5%.
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What types of agreements do I have to sign?
You will be asked to sign three agreements:
• Firstly, the finance agreement, which is a Hire Purchase Agreement;
• Secondly, the maintenance agreement if you have chosen this option; and
• Thirdly, the guaranteed buy-back agreement, which enables you to ask Bank of Scotland Vehicle Finance to buy the car back from you for the agreed value if you do not wish to exercise your option to purchase the car at the end of the contract.
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I can't find the car I am looking to purchase on Cash or Car? what do I do?
Our featured leasing company, Bank of Scotland Vehicle Finance, will be able to provide a PCP quote for every new vehicle available in the UK. If you cannot find the Marque or Model, please call the Helpline No. 0845 120 1207.
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What happens if I decide to rejoin my company car scheme half way through the PCP?
You may terminate a PCP agreement at any time. However, each leasing company that quotes through 'Cash or Car?' will have its own terms and conditions, which you should read carefully. In general, you will need to pay:
• any arrears;
• any other money due such as interest;
• If necessary, the cost of any repairs needed to the vehicle; and
• any fee for early termination.
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If I decide not to buy the car at the end of the PCP, what extra costs are involved if any?
In a PCP agreement, the final balloon payment secures your ownership of the vehicle. If you do not wish to keep your vehicle you simply choose not to make this payment and return the vehicle to the leasing company.
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