Hire cars for employee business trips: is there a benefit

A hire car that an employer provides for a business trip is treated like any other company car: if it is available for the employee’s private use, a car benefit charge arises for the days it is available. There is no special relief for hire cars and no allowance for incidental private use outside the pool car rules, so taking a hire car home or keeping it over a weekend can create a charge unless private use was banned and genuinely did not happen.

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Does a hire car count as a company car for tax?

Yes, if it meets the conditions in section 114 ITEPA 2003. The car benefit rules apply where a car is made available to an employee without any transfer of ownership, by reason of the employment, and is available for private use (EIM23020). Hiring is not a transfer of ownership, and HMRC’s guidance at EIM23215 says the charge can apply where the car is hired or leased to the employee, whether or not by the employer and whether the arrangement is formal or informal. Where the employer makes the car available, section 117 treats it as made available by reason of the employment (EIM23250).

Section 114(1A) also makes it irrelevant whether the terms amount to a fair bargain, so the fact that the hire company charges a commercial rate does not help. The only real question is whether the car was available for private use.

When is a hire car available for private use?

Section 118(1) treats a car made available in a tax year as available for private use unless, in that year, the terms on which it is made available prohibit private use and it is not used privately. HMRC’s summary at EIM23400 is that both parts are needed: an express, legally enforceable ban and evidence that there was no private use.

“Private use” means any use other than the employee’s business travel (section 118(2)). Business travel is travel for which the employee could deduct the expense under the travel rules in Part 5 Chapter 2 ITEPA 2003 (section 171(1)). An ordinary commuting journey counts as private use, even for an employee who is on call (EIM23305). So:

a hire car provided with no prohibition is chargeable even if the employee only drives to meetings, because it is treated as available
a hire car provided with a prohibition is still chargeable if the employee uses it for any private journey during the year

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Is “incidental” private use allowed?

Only for pool cars. The phrase “merely incidental” comes from the pool car exemption in section 167, which removes the charge only if the car, in the tax year:

was made available to, and actually used by, more than one employee
was not ordinarily used by one of them to the exclusion of the others
was used privately by each employee only in a way that was merely incidental to their other use
was not normally kept overnight at or near any of the employees’ homes

HMRC applies the incidental test qualitatively (EIM23455). Its own example is a pool car taken home the evening before an early start on a long business journey: the office to home trip is private use on its own, but it is plainly subordinate to the next day’s business trip. A car hired for one employee’s trip will normally fail the first condition, so this reasoning is not available to it. Without pool car status, EIM23410 is clear that any actual private use in the year produces a charge, however small.

Statement of Practice 2/96 (EIM23460) lets small, infrequent private use be ignored when deciding pool car status, generally no more than 5% of annual mileage, but only for emergency use on compassionate grounds or use incidental to another tax free benefit. It is a pool car rule, not a general allowance. The full pool car conditions are explained on pool cars: the conditions for no tax charge.

What about taking the car home the night before or keeping it over a weekend?

Driving a hire car from the office to home the evening before a trip is, taken alone, an ordinary commuting journey, which HMRC treats as private use (EIM23455 and EIM23305). For a hire car that is not a pool car, that single journey is enough to make the car available for private use. Weekend leisure trips, school runs or shopping on the way back are private use in the plainest sense.

Employers who want hire cars to stay outside the charge usually organise the hire around the journey: collection on the morning of the trip, return as soon as it ends, and a written condition that the car is for business travel only.

How is the charge worked out if it applies?

The normal car benefit calculation applies: the car’s list price multiplied by the appropriate percentage for its CO2 emissions, reduced for days when the car is unavailable (see company car tax). Under section 143(2), days before the car is first available to the employee and days after it is last available count as unavailable (EIM25105), so a short hire is charged only for the days it was in the employee’s hands. A car hired several times in a year is several short periods of availability, each charged on its own.

If the employer also pays for fuel and the car is chargeable, a fuel benefit charge arises under section 149, including where fuel is bought on a company card or reimbursed (see car fuel benefit charge). The employer pays Class 1A National Insurance on car and fuel benefits (EIM23055).

Illustration only. A hire car with a list price of £30,000 and an appropriate percentage of 20% is kept over a weekend for four days. The annual figure is £6,000, and four days out of 365 gives a benefit of about £66. The tax is small, but it still has to be reported, Class 1A is due, and an employer whose staff do this routinely builds up a pattern HMRC will notice in a compliance check.

What if the employee hires the car personally and claims it back?

EIM23215 says the charge can apply to a car hired to the employee even where the employer is not the hirer. Where someone other than the employer makes the car available, section 117 does not automatically apply and the facts decide whether it was provided by reason of the employment (EIM23260). If the employer is meeting the cost, it is hard to argue the car has nothing to do with the job, so reimbursed hires should be managed under the same policy as hires the employer books.

What about hire cars used while a company car is off the road?

A car hired as a temporary replacement for an employee’s own company car is a different situation with its own rules to stop two charges arising for one car. See replacement company cars.

What mistakes come up most often?

Assuming a hire car is outside the benefit rules because it is only for a few days.
Relying on “incidental” private use when the car is not a pool car.
Banning private use in terms that do not cover commuting, which HMRC says makes the ban ineffective for tax (EIM23400).
Paying for fuel on a hire car used privately and forgetting the fuel benefit.
Keeping no record of where the car went, so the employer cannot show there was no private use; see proving a ban on private use.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.