An alternative to providing cars for your employees

Offering a company car grant instead of a car will reduce the employer’s Class 1A Social Security contributions (for providing both a company car and – in some cases – fuel) and relieve employees.

Tax liabilities

Company car tax obligations – a potential win-win scenario for both parties. A car allowance, also known as “cash for car”, is – to put it simply – a salary increase auto złom czechowice dziedzice that is paid to the employee in lieu of providing a car.

The company also benefits from the elimination of the total cost of living associated with operating a company car and the cost burden of managing the fleet. Employees will also benefit greatly as they will effectively see a raise in their monthly salary based on PAYE deductions related to the company car tax benefit in kind (BIK) calculation.

The move to company car allowances was partly spurred by the Labor Government’s 2002 budget changes to the In Kind Tax (BIK), which ousted many desirable “status cars” from users’ company car lists.

Employee

Employees can use their monthly pay raises to buy or lease a new car, either through traditional financing methods—hire purchase and lease purchase—or by signing up for a Personal Contract Purchase (PCP) or Personal Contract Hire (PCH). Offered by many of the UK’s leading leasing companies.

The latter two leases involve the payment of fixed monthly payments or rent. With PCP contracts, ownership of the car is usually accomplished by paying a final balloon payment, but both options usually offer the lessee the option to return the car at the end of the contract (usually 2 or 3 years) – subject to a pre-agreed mileage and normal wear and tear.

Business kilometers

Employees who use their own cars for business mileage can recoup some of their travel expenses by claiming taxes and non-contributory (NIC-free) Authorized Mileage Allowances (AMAPs) to National Insurance. The Government has set the target at 40p for the first 10,000 miles in a tax year and 25p per mile thereafter. Caution should be exercised with such regulations, as there is a risk that these payments could give employees an incentive to drive more service kilometers than is actually necessary.

While they have many benefits, company car grant schemes can fall short in the following areas:

• Claim for excess mileage
• Inadequate insurance issues as cars for business use may not be properly insured
• Vehicle safety issues as employers still have a duty of care to their business drivers even if employees drive their own cars
• During a recession, company car grants can become more expensive, while the price of new cars can often go down in real terms. Employers may find that they pay employees company car allowances that actually cost them more than providing the employee with a company car.

Of course, some employees may choose to purchase a used car with a cash allowance. However, it’s generally larger, less fuel-efficient cars that offer the best value second-hand. This could have a negative impact on the company’s environmental goals.

Managing Your Gray Fleet
Employers retain responsibility for an employee’s safety – even if the employee drives their own car service pickup for business trips – as it is a designated workplace. This can often lead to unforeseen problems, as these vehicles tend to get “off the radar” by most companies – certainly in terms of practicality.

Companies were

While many companies are downsizing their company car fleets due to increases in company car taxes, many companies failed to realize that they would continue to have a duty of care to their employees who would drive their own vehicles on company service. skup aut czechowice These vehicles are referred to as a company’s “grey fleet”.

Here are a few tips to help companies keep track of their “grey fleet” drivers:

• Support your gray fleet employees to make an informed decision about claiming a car allowance instead of a company car. Employees could spend the next three or four years wondering if they made the right decision. Help them by explaining exactly what each choice means to them in terms of their personal tax situation and other expenses related to running a car.
• Regularly check the driver’s licenses of your “grey fleet” employees. And require all professional drivers to submit regular copies of their driver’s license, as companies are required by law to have these records. Better yet, contact a third party to conduct a thorough review at the DVLA.
• If an employee’s own vehicle will be used for business travel, narrow their choices to exclude soft tops or old cars. Staff will balk at any policy they find too clumsy, but it’s fair enough to require the vehicle to have four doors, four seats, and a professional, businesslike look.
• Invest in a robust mileage tracking tool, preferably with a payroll feature.
• Streamline management of a mixed fleet. Many companies offer a casual version of this by offering car allowances and cars side-by-side, but a specialist mixed fleet provider will manage a mixed fleet in the most tax efficient way, taking care of all the mileage logging and busy road risk and general administrative duties. This type of regulation would only be suitable for fleets of more than 50 vehicles.