Furlough pay is subject to income tax, and is treated as part of total earnings. Therefore company car drivers will still see company car tax being deducted on their payslips. This will be doubly painful if the car is not being used, or other transport is available.
Company car tax applies as soon as the company makes a car available to an employee. It makes no difference if the employee follows government COVID-19 guidance, and does not get in the car for months, because theoretically the car could still be used for an urgent trip to buy food or other supplies.
So to avoid company car tax, the vehicle has to be made unavailable for more than 30 days. Shorter periods do not count. If you can do without use of the company car for 30 days or more, here are some approaches:
- Ask the company to take the car away, and document that you cannot have it back until normal work and pay resume.
- Return all keys to the company, and get the company to confirm that you cannot have the keys back. HMRC would still need some evidence that you cannot acquire "availability" on a simple change of mind.
- Assign the car to another driver. There may be structural changes in the company which increase the options for this.
- Or if your employer is looking to support the NHS and other keyworkers, this could be anyone and include a nurse for instance. Provided the nurse's employer was not involved in the transaction, there would be no company car tax on them.