Company car running cost contribution agreement

If an employee or director is required to and actually pay their employer towards the running costs of their company car it reduces the taxable benefit in kind. To ensure the contribution is effective the employer and employee should formalise the arrangement in an agreement.

qualifying contirbutions

Contributions by an employee towards the running costs incurred by their employer reduce the amount of taxable car benefit pound-for-pound. The reduction also applies to the amount chargeable to Class 1A NI. To be effective the employee must be required by their employer to make the contribution. Use our Company Car Running Cost Contribution Agreement to ensure the agreement is correctly worded.

timing

For a contribution to be effective in reducing car benefit for a tax it it must be paid no later than 5 July following the end of that year.