Introduction to this document

Company car running cost contribution agreement

If an employee or director makes a monthly contribution towards the company car, this can reduce the taxable benefit providing it can be shown that the contribution is required and is in respect of private use of the car.

Monthly company car contirbutions

It’s common practice under many company car schemes for employees to have to make monthly contributions to their employer for use of the car. Providing the agreement is structured correctly, these contributions can reduce the taxable company car benefit, saving the employee tax and the company Class 1A NI.

The law states that the employee must be required to make a contribution which suggests that it must be a contractual obligation, otherwise no deduction will be allowed. Use our agreement to document this requirement.

Note. The contributuion must be in respect of private use of the car, and not merely to secure a better car than would otherwise have been available, in which case no deduction would apply.