For businesses that need employees to travel for work, providing access to a vehicle can make day-to-day operations much easier. But should you give an employee their own company car, or would a pool car work better?
The right choice depends on how your employees use vehicles, how often they travel and whether they need access to a vehicle outside of work.
Understanding the difference between a company car and a pool car can also help businesses consider their business vehicle insurance, tax and vehicle management requirements.
What is a company car?
A company car is a vehicle provided by a business for an employee to use because of their job.
In many cases, the employer allocates the car to one employee. The employee may use it for business journeys and, depending on the arrangement, private journeys too.
For example, a sales manager who regularly travels to meet customers might have a company car that they use for work throughout the week and for personal journeys outside working hours.
If an employee can use a company car privately, including for ordinary commuting, the business will generally need to report the benefit to HM Revenue & Customs (HMRC). The employee may also have to pay tax on the benefit.
The amount of company car tax depends on factors including the vehicle’s list price, CO₂ emissions and fuel type.
What is a pool car?
A pool car is a company vehicle that multiple employees can use for business purposes.
Rather than allocating the vehicle to one person, the business keeps it available for employees who need it for work.
HMRC sets specific conditions for a vehicle to qualify as a pool car. Among other requirements, it must be available to and actually used by more than one employee, must not normally be used by one employee to the exclusion of others, and must not normally be kept overnight at or near an employee’s home.
Businesses should also keep appropriate records to demonstrate how employees use their pool vehicles.
A qualifying pool car is generally exempt from the company car benefit charge, which can make pool cars an attractive option for businesses that only need vehicles for work-related journeys.
Company car vs pool car: the key differences
| Company Car | Pool Car |
| Usually allocated to one employee | Shared between multiple employees |
| Can potentially be used privately | Primarily intended for business use |
| May create a taxable benefit for the employee | A qualifying pool car does not create a company car benefit |
| Can be kept at an employee’s home | Normally kept at the business premises |
| Convenient for employees who travel frequently | Useful for occasional or shared business journeys |
| Can suit roles involving regular customer or site visits | Can suit businesses with several employees who need occasional vehicle access |
The biggest difference is how the business allocates and uses the vehicle.
Which is better for your business?
There is no single answer. A company car may make more sense if an employee travels frequently and needs reliable access to a vehicle.
For example, a business development manager who visits customers across the country could benefit from having a dedicated company car. It gives them consistent access to a vehicle and can make business travel easier to manage.
A pool car could make more sense if several employees occasionally need a vehicle but do not travel often enough to justify individual cars.
For example, a business might have several employees who attend occasional site visits. Rather than providing each employee with a company car, the business could maintain a small number of pool vehicles.
What about insurance?
Whether you operate company cars or pool cars, you need to make sure your business vehicle insurance reflects how your vehicles are actually used.
The appropriate cover can depend on factors such as who drives the vehicles, how they use them and the type of business journeys involved.
Businesses with several vehicles may also want to consider fleet insurance. This can provide a way of managing insurance for multiple vehicles under one policy, although the suitability of fleet insurance depends on the individual business and its circumstances.
It is important to be clear with your insurer about how your vehicles operate. For example, if employees share vehicles or different members of staff drive them, your insurer needs accurate information when arranging cover.
Company car or pool car: which should you choose?
A company car can be a practical choice when an employee needs regular access to a vehicle as part of their role. However, businesses should consider the additional tax and management implications where private use is allowed.
A pool car can be more efficient when several employees need occasional access to a vehicle for business purposes. However, the vehicle needs to meet HMRC’s requirements to qualify as a pool car for tax purposes.
Before deciding, consider:
- How many employees need access to vehicles?
- How frequently will they travel?
- Do employees need to take vehicles home?
- Will employees use vehicles privately?
- How many vehicles does the business actually need?
- What type of business vehicle insurance is appropriate?
- Would fleet insurance be suitable?
There is no universal winner between a company car and a pool car. The better option is the one that matches your business’s actual travel requirements while keeping vehicle, tax, insurance and running costs under control.
