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Introduction to this document

Employee pool car agreement

Banning private use is essential for a car to be considered a pool car by HMRC. A verbal ban may work but it’s more sensible to require the employee to sign an agreement that specifically states that the car is not to be used for private use. This will also help convince HMRC that you operate a genuine pool car arrangement.

Terms of use

Verbally banning employees from using pool cars for private journeys was good enough for one VAT tribunal; however, we recommend that you’ll be on much safer ground by using an Employee Pool Car Agreement before letting any employee use a car. Always make your intentions clear from the start of a pool car arrangement by explicitly banning private journeys. This way when buying your next pool car you should be able to claim back the VAT on it.

This agreement lays out the terms of use for pool cars: that private use is banned, all journeys are to be logged on the pool car journey record, and that the car should not be kept at or near someone’s house except in exceptional circumstances.

The agreement also makes it clear that each car is not for the exclusive use of one particular person; this is vitally important in establishing its pool car status. The car must be driven only by authorised personnel and you must obtain a copy of their driving licence before you allow them to drive it. All fuel must be paid for by the company.

There is also a clause relating to damage to the vehicle. By signing the agreement, the employee is agreeing to repay the company should the car be damaged due to the employee’s negligence or wilful neglect. They will also accept responsibility for an excess payment should the car be involved in an accident, regardless of the circumstances.

Together with the journey record, using this agreement should help to convince an inspector that you operate a genuine pool car arrangement.