Company car salary sacrifice 'advantage'

Date Posted: 16/03/2011 17:05:21

Venson gives firms company car salary sacrifice 'Advantage' as higher personal taxes and NICs bites

Increases in income tax rates, scheduled April 2011 rises in National Insurance contributions and potential savings from running low emission company cars are the ingredients that are encouraging an increasing number of employers to look at launching salary sacrifice schemes.

That’s the view of Venson Automotive Solutions, which has unveiled Venson Advantage, its new company car salary sacrifice scheme with built-in risk elimination for employers.

Venson Advantage has been launched due to demand from customers that view salary sacrifice schemes as:

  • Delivering savings in NIC, which are paid on employee benefits-in-kind such as company cars at the rate of 12.8% rising to 13.8% on April 6, 2011
  • A mechanism for cutting their carbon footprint as, typically, the largest financial savings for both employers and employees are on low emission cars
  • Improving duty of care by encouraging company car scheme cash option employees and staff who drive their own cars on business - the so-called ‘grey’ fleet - into company cars
  • Adding another flexible option to their existing portfolio of employee benefits.

Salary sacrifice works best when substituting salary for a benefit that is taxed at a much lower rate.

Therefore with income tax rates rising and personal allowances being cut, employees can make tax savings by sacrificing salary in return for a benefit-in-kind. In the case of a company car this would see a basic rate taxpayer giving up salary currently taxed at 31% (income tax and NIC) and a higher rate taxpayer giving up salary taxed at 51% and selecting a car with emissions below 120 g/km paying tax on 10% of the P11d value (13% for a diesel car).

Venson Automotive Solutions’ managing director Samantha Roff said: “With a series of tax and National Insurance rises imminent and the current benefit-in-kind tax system encouraging the uptake of low emission company cars, the financial position of vehicles in comparison with cash allowances will improve.

“All companies and their employees who are in receipt of a cash allowance should recalculate whether they would be better off returning to the traditional company car.

“In many cases, particularly if choosing a low emission model, we would anticipate that a company car would be the financially astute option for both employers and their staff. As the Government looks to cut personal tax thresholds, introduce a 50% tax rate and increase NICs, employees and employers will look to legitimately lower their tax charges.

“Additionally, companies that encourage staff into salary sacrifice schemes will be better able to manage their at-work driving health and safety compliance and, almost certainly, will deliver carbon footprint reductions.”

Salary sacrifice take-up could also be further fuelled by the accelerating arrival of an increasingly wider choice of low emission cars from vehicle manufacturers.

Ironically, with the Government looking to encourage low carbon motoring, company car salary sacrifice schemes could kick-start corporate demand for electric vehicles, which since April 6 are exempt from benefit-in-kind tax for five years.

Venson Automotive Solutions’ online fleet management system, Venson Interactive, now includes a sophisticated quotation system that enables both employers and employees to calculate whether or not they would be better off opting to sacrifice salary in return for a company car.

Additionally, an employer ‘legal pack’ compiled with help from tax specialists and employment lawyers helps organisations to amend staff employment contracts in the event of them opting to sacrifice salary for a company car.

Ms Roff said: “Introducing a salary sacrifice scheme will see companies contract hiring vehicles from ourselves. Just as with conventional leasing schemes they want to be certain that they have limited risk exposure. Therefore we have compiled the ‘legal pack’ that provides straight-forward advice in the event of staff being made redundant, on long-term sickness, wracking up end-of-contract damage, excess mileage etc. The advice is aimed at ensuring that employers are not left with unwanted cars and large bills by providing them with information on rewriting employees’ terms and conditions.”

Additionally, employees who opt for a company car through a salary sacrifice scheme will be issued with a ‘driver’s guide’, which is packed full of question and answer information on key issues.

Ms Roff added: “Sacrificing salary for a company car is increasingly on our clients’ agenda. However, it is not a ‘one glove fits all’ option that is suitable for everyone. Financial calculations must be undertaken on an individual basis and potential employer and employee savings will vary depending on the price and CO2 emissions of vehicles. Where salary sacrifice is appropriate we will make that recommendation.”

Venson Automotive Solutions currently has almost 12,000 company cars and light commercial vehicles on lease and under fleet management. 

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