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Company Car Under Operating Lease

If an employee makes use of a company vehicle which is leased by the employer, the taxable value of the vehicle must be added to the employee's remuneration each month.

The value of the fringe benefit is calculated as the actual cost to the employer incurred under that operating lease and the cost of fuel in respect of that vehicle. The fringe benefit value is either 80%, 20% or 100% taxable, depending on the proportion of private use:

  • If the vehicle is used 80% or more for business purposes, the value of the company car benefit is 20% taxable.
  • If the vehicle is used less than 80% for business purposes, the value of the company car benefit is 80% taxable.
  • If the vehicle is used 0% for business purposes (i.e. it is used only privately), the value of the company car benefit is 100% taxable.

SimplePay has a built-in item to accommodate the special tax and reporting requirements related to a company car under an operating lease. This income will be reported under code 3816.

  1. Go to Employees, and select the relevant employee.
  2. Click Add next to Regular Inputs.
  3. Click Company Car Under Operating Lease under Benefit.
  4. Enter the actual cost incurred for the vehicle.
  5. (Optional) Enter the amount of Consideration paid by employee for the vehicle's private use, and tick Paid via payroll if this amount should also be deducted from the employee's Net Pay.
  6. Select the Taxable Percentage as "80%" or "20%", based on the employee's use of the vehicle (this can be determined by the employee's logbook). Alternatively, select "100% (i.e. no business use)" if the company car is used only for private purposes and no logbook is kept.
  7. Click Save.

Consideration paid by employee

The amount entered reduces the company car benefit before the taxable percentage is applied, down to a minimum of 0 – it can never make the benefit negative. If Paid via payroll is ticked, this amount is also deducted from the employee's Net Pay, shown on the payslip as "Company Car - Consideration Paid by Employee (operating lease)".

Multiple Company Cars

On SimplePay, it is possible to have two or more company cars added to an employee's profile. To do so:

  1. Follow steps 1-5 as outlined above.
  2. Select the Taxable Percentage as "80%", "20%" or "100% (i.e. no business use)". Note that this should match the Taxable Percentage of the other company car(s) already added to the profile.
  3. Click Save.

Same taxable percentage for all company cars

The private use percentage must be the same for all company cars used by a particular employee. There cannot be a different percentage subject to PAYE for this benefit as it relates to the requirement of the employee to travel for business purposes.