Use this template to create a clear company car policy managing eligibility, responsibilities, and costs.

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Company Car Policy

[Company Name]

Policy Owner: [Fleet Manager / HR Director] Effective Date: [Date] Last Reviewed: [Date] Next Review: [Date]

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1. Purpose and Scope

1.1 Purpose

This policy sets out the rules for the provision, use, and maintenance of company cars at [Company Name].

1.2 Scope

This policy applies to:

• All employees provided with a company car
• Employees eligible for a company car
• Managers authorizing company car provision

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2. Eligibility

2.1 Job Roles

Company cars are provided to employees in the following roles:

• [Senior management / Directors]
• [Sales roles requiring extensive travel]
• [Field-based staff / Service engineers]
• [Employees with business mileage exceeding X miles per year]

2.2 Eligibility Criteria

To be eligible for a company car, you must:

• Hold a full UK/EU driving license valid for the vehicle type
• Have held a license for minimum [2] years
• Have no more than [6/9] penalty points
• Have no driving ban in the last [3/5] years
• Have a satisfactory driving record (no at-fault accidents in last [X] years)
• Meet the role criteria above

2.3 License Checks

The Company will:

• Check your license before issuing a car
• Conduct annual license checks (you must provide access via DVLA online service)
• Check for points, bans, or restrictions

You must inform [Fleet Manager] immediately if:

• Your license is endorsed (points added)
• You are banned from driving
• Your license is revoked or suspended
• You change address

Failure to disclose license issues may result in withdrawal of the car and disciplinary action.

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3. Car Allocation and Choice

3.1 Car Grades

Company cars are allocated according to job grade:

Grade	Annual List Price Limit	CO2 Limit	Examples
Grade 1 (Directors)	Up to £[45,000]	[Under 130g/km]	[Models]
Grade 2 (Senior Managers)	Up to £[35,000]	[Under 120g/km]	[Models]
Grade 3 (Managers / Field Staff)	Up to £[25,000]	[Under 110g/km]	[Models]

3.2 Vehicle Selection

You may choose from the Company's approved vehicle list within your grade. The list includes:

• [Make/models approved]
• Specifications and features
• Environmental ratings

Not permitted:

• Vehicles above your grade limit
• Two-seater sports cars
• Vehicles with CO2 emissions above grade limit
• Modified or non-standard vehicles

3.3 Environmental Policy

The Company is committed to reducing fleet emissions. Priority is given to:

• Electric vehicles (EVs)
• Plug-in hybrids (PHEVs)
• Low-emission petrol/diesel vehicles

Electric vehicles: If you choose an EV, the list price limit increases to £[X] to reflect current EV pricing.

3.4 Lease Term

Company cars are leased for [3 / 4] years or [60,000 / 80,000] miles, whichever comes first.

At this point, the car will be replaced. You may request early replacement if mileage limit is approached.

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4. Private Use

4.1 Permitted Use

Company cars may be used for:

• Business travel: All work-related journeys
• Commuting: Travel between home and normal place of work
• Private use: Personal journeys [with restrictions - see below]

4.2 Private Mileage Restrictions

[Option A - Unlimited private use:] Unlimited private mileage is permitted. However, you are responsible for the tax on the benefit-in-kind.

[Option B - Limited private use:] Private mileage is limited to [X,000] miles per year. Excess private mileage may be charged at [Xp per mile].

[Option C - Business use only:] The vehicle is for business use and commuting only. Private use is not permitted except [occasional/incidental use].

4.3 Commuting

Travel between home and your normal place of work is permitted and is treated as private mileage for tax purposes.

4.4 Restricted Use

Company cars must not be used for:

• Racing, rallying, or competitions
• Driver training or testing (unless approved)
• Towing (unless vehicle is rated and approved)
• Carrying paying passengers (private hire / taxi use)
• Any illegal purpose
• Carrying hazardous materials (unless approved)
• Driving outside the UK without prior approval

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5. Insurance

5.1 Company Insurance

The Company provides comprehensive insurance covering:

• Business use
• Commuting
• Private use (if permitted)
• [Spouse/partner] as named driver

Policy excess: £[500 / 1,000] per claim

5.2 Named Drivers

The following may drive your company car if listed on the insurance:

• You (the employee)
• Your spouse/civil partner/partner (living at same address)
• [Other employees with business need and Company approval]

All drivers must:

• Hold a valid UK/EU license
• Meet the Company's driver eligibility criteria
• Be declared to the insurer

Not permitted:

• Children/relatives under 25 (unless approved)
• Friends or other third parties
• Anyone without a valid license
• Anyone who has been refused insurance

5.3 Accidents and Claims

In the event of an accident:

Immediate actions:

1. Stop and exchange details with other parties
2. Take photos of damage and scene
3. Do NOT admit liability
4. Report to police if anyone is injured or other party leaves
5. Notify [Fleet Manager / Insurance team] within 24 hours

The Company will:

• Arrange repairs through approved repairers
• Provide courtesy car if needed
• Handle insurance claim

You are responsible for:

• Paying the insurance excess (£[X]) for at-fault accidents
• Any increase in insurance premium due to your fault
• Damage caused by misuse or negligence

The Company may recover full costs if:

• You were driving under the influence
• You allowed an uninsured/unlicensed driver
• You used the car for prohibited purposes
• You breached this policy

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6. Maintenance and Care

6.1 Servicing

The Company arranges and pays for:

• Regular services per manufacturer's schedule
• MOT tests
• Repairs and replacements
• Tyres (normal wear and tear)

You must:

• Ensure the car is serviced on time (you'll be notified)
• Book service appointments via [Fleet Manager / leasing company]
• Use only approved service centers
• Report any mechanical issues immediately

6.2 Daily Checks

You are responsible for:

• Checking oil, water, tyre pressure regularly
• Ensuring lights and indicators work
• Maintaining cleanliness (inside and out)
• Reporting warning lights or issues immediately

The car must be kept in good condition. Excessive wear and tear may be charged to you.

6.3 Tyres

The Company provides replacement tyres for normal wear and tear.

You must ensure:

• Tread depth is legal (minimum 1.6mm, recommended 3mm)
• Tyres are correctly inflated
• Damage is reported immediately

You are responsible for costs if:

• Damage is due to misuse (e.g., hitting kerbs)
• Tyres are not maintained properly

6.4 Fuel

[Option A - Employee pays:] You are responsible for fuel costs. [The Company provides a fuel card for business mileage - claim back via expenses.]

[Option B - Company pays all:] The Company provides a fuel card covering all fuel costs (business and private). This is a taxable benefit.

[Option C - Business fuel only:] The Company provides fuel for business mileage only via fuel card. Private mileage fuel is your responsibility.

6.5 Charging (Electric Vehicles)

[If providing EVs:]

Home charging:

• The Company will install a home charger (if you own/approve it with landlord)
• Electricity costs for business charging will be reimbursed at [X]p per kWh
• [Alternative: Fixed monthly charging allowance of £[X]]

Public charging:

• Use the Company fuel card at public charge points
• The Company pays for business charging
• [Private charging costs are your responsibility / included in BIK]

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7. Tax and National Insurance

7.1 Benefit-in-Kind

Company cars are a taxable benefit. You will pay income tax on the car's benefit-in-kind (BIK) value.

BIK is calculated based on:

• Car's P11D value (list price when new, including options)
• CO2 emissions
• Fuel type (petrol, diesel, electric, hybrid)

Tax you pay = BIK value × your income tax rate

Example:

• Car P11D value: £30,000
• CO2: 120g/km = 27% BIK rate
• BIK value: £30,000 × 27% = £8,100
• If you're a 40% taxpayer: £8,100 × 40% = £3,240 per year tax

7.2 Reporting

The Company will:

• Report the BIK value to HMRC via P11D
• Adjust your tax code to collect the tax via PAYE

You do NOT need to declare it on your tax return unless you have other untaxed income.

7.3 Fuel Benefit

[If company pays for private fuel:]

Private fuel is a separate taxable benefit calculated at:

• Fuel benefit charge (£[27,800 for 2024/25]) × car's BIK percentage

This is usually expensive. Consider paying for private fuel yourself.

7.4 Employer's National Insurance

The Company pays 13.8% Class 1A National Insurance on the car's BIK value.

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8. End of Car Provision

8.1 When Car Provision Ends

Your company car will be withdrawn if:

• You leave employment
• Your role changes and you're no longer eligible
• You lose your driving license or accrue [12] points
• You breach this policy seriously
• The Company withdraws the benefit (with [X] months' notice)
• You request to return the car

8.2 Return of Vehicle

On termination of car provision, you must:

• Return the car within [5 / 10] working days
• Return the car in good condition (fair wear and tear accepted)
• Include all keys, documents, fuel card, equipment
• Have the car cleaned (interior and exterior)

8.3 Damage and Excess Wear

The car will be inspected on return. You will be charged for:

• Damage beyond fair wear and tear
• Missing equipment or keys
• Excessive mileage (over contract limit)
• Lack of service history
• Smoking-related damage (if non-smoking policy)

Charges will be deducted from your final pay or invoiced if you've already left.

8.4 Alternatives

If you no longer receive a company car, you may be offered:

• Car allowance: £[X] per month (taxable)
• [Mileage allowance: [45p/mile] for business mileage using your own car]
• [Salary increase in lieu of car]

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9. Fines and Penalties

9.1 Parking and Speeding Fines

You are personally responsible for all fines incurred while driving the company car:

• Parking fines
• Speeding fines
• Congestion charges
• Low Emission Zone charges
• Other penalties

If a fine is sent to the Company:

• The Company will identify the driver and forward the fine to you
• You must pay the fine directly
• The Company may charge an administration fee of £[25] per fine processed

Failure to pay fines may result in:

• Bailiff action against the Company
• Costs recovered from you
• Disciplinary action
• Removal of company car

9.2 Penalty Points

If you accumulate penalty points:

• 6-8 points: Review of company car provision, potential restrictions
• 9-11 points: Company may withdraw car or suspend provision pending court outcome
• 12 points (ban): Company car withdrawn immediately

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10. Responsibilities

10.1 Employee Responsibilities

You must:

• Drive safely, legally, and courteously
• Hold a valid license at all times
• Maintain the car in good condition
• Report accidents, damage, fines immediately
• Keep the car secure (locked, alarmed)
• Comply with manufacturer's guidance
• Return the car when requested
• Use the car only for permitted purposes
• Ensure named drivers are authorized and insured
• Complete DVLA license checks when requested

10.2 Manager Responsibilities

Managers must:

• Ensure only eligible employees receive cars
• Approve car selection within policy
• Monitor compliance with policy
• Address misuse promptly
• Review continued eligibility annually

10.3 Fleet Manager Responsibilities

The Fleet Manager will:

• Administer the car scheme
• Maintain approved vehicle list
• Arrange insurance, servicing, repairs
• Process accident claims
• Conduct license checks
• Report BIK to HMRC

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11. Breach of Policy

Serious breach of this policy may result in:

• Immediate withdrawal of company car
• Disciplinary action (up to dismissal for gross misconduct)
• Recovery of costs incurred
• Police referral (if criminal activity)

Examples of serious breach:

• Drink/drug driving
• Allowing uninsured driver
• Providing false information
• Failing to report accidents
• Misusing the car (racing, illegal activity)
• Repeated driving offenses

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12. Related Policies

• Expenses Policy
• Driving at Work Policy
• Health and Safety Policy
• Alcohol and Drug Policy
• Data Protection Policy (mileage data)

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13. Queries

Questions about this policy should be directed to:

[Fleet Manager Name] Email: [email] Phone: [phone]

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Key Points Summary

For Employees:

• Check your license is always valid
• Report all accidents within 24 hours
• Service the car on schedule
• Pay your own fines immediately
• Return car in good condition
• Understand your tax liability

For Managers:

• Only approve cars for eligible roles
• Check licenses before authorizing
• Monitor policy compliance
• Address misuse promptly

Common Mistakes:

• Not reporting accidents promptly
• Allowing uninsured drivers
• Ignoring service schedules
• Accruing excessive penalty points
• Not understanding tax implications
• Failing to check license validity