The Short Answer
A pool car is a car made available for business use by all employees. If certain rules are followed there is no benefit in kind charge to the employee.
When an employee is given a company car, that employee is taxed as if the car was additional salary (a ‘benefit in kind’). A complicated formula is used to arrive at the amount of additional salary that is to be assumed.
To avoid a benefit in kind pool cars can be used. Here the car is not provided to the employee but all employees. As the cars are not available for the personal use of the employee there is no tax consequence to the employee.
The classic use of pool cars is with estate agents. Typically estate agents will have a pool of branded cars that all staff can use as and when required.
There are a number of rules that must be followed to ensure this is a pool car not a standard company car. These are:
1. The car is made available to, and actually used by, more than one employee
2. The car is not ordinarily used by one employee to the exclusion of others
3. The car is not normally kept at or near employees’ homes
4. The car is only used for business journeys. Private journeys are allowed but only if it is merely incidental to a business journey, for example driving from work to home in order to leave early for a business journey the following morning.
If these rules aren’t followed then each employee using the car could face a benefit in kind. So it’s really important that the rules are followed.