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Is it worth offering a company car scheme?

For many employers and employees, company car initiatives have been hugely beneficial. However, they are not for everyone and it’s a good idea for both company directors and staff to take time to consider their options before signing up to such initiatives. If, as a driver, you don’t feel particularly flexible about what you’ll be happy driving, you may not be satisfied with the vehicle on offer. However, significant savings can be made when you enter into a company car contract hire agreement, particularly on National Insurance.

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Grey Fleet Options

If you don’t take up the offer of a company car, your employer may offer you a car allowance plan based on what it would have cost them to provide one. It’s worth remembering that a significant chunk of this may be taken away in tax however. You may still be able to expect your employer to cover maintenance as part of their duty of care, with your car being part of what is called their “grey fleet” as well as your mileage costs. Your car is only likely to be considered part of a “grey fleet” if you use it for business other than simply getting to work and back.

Assessing Risks

Many company cars are funded by salary-sacrifice schemes, and these usually lead to fewer Class 1A NICs being payable. As the vehicles provided under such schemes tend to be more eco-friendly, companies can reduce their carbon footprint by offering them, as the reliance on the “grey fleet” can be lessened. Whether a car is part of a “grey fleet” or provided by the company, it still needs to be maintained and checked. It’s wise for companies to assess the likely take-up of company car schemes before they sign up for company car leasing, as some companies only see 10% of their staff signing up for the initiatives.

Tax Obligations with Car Allowance

Company car tax is payable by employees, and can be one of the most important factors to consider when an employee is deciding whether to take up an offer. CO2 emissions do run up costs when it comes to tax, but manufacturers have offset by reducing the amount of CO2 that is produced by the vehicles. Some people can be swayed by car allowance schemes rather than contract hire leasing initiatives, but if you’re a higher-rate taxpayer you may only be left with a relatively small sum to run, maintain and insure your car. Companies tend to lease car from providers rather than buying them outright in order to avoid the obvious maintenance and problems that are likely to surface a few years down the line.

More Pros and Cons

Offering a green, low-emission company car to employers can be extremely cost-effective, as mileage costs aren’t likely to be as high as they would be if a grey fleet vehicle was being utilised. Grey fleet vehicles are also more likely to require maintenance and repairs, unlike new company-provided cars. Employers are always likely to restrict choice when it comes to company cars, only offering cars that emit the lowest amount of CO2. Using a company car can also help employees to extend the lifespan of their own vehicles by reducing their mileage levels. If implemented correctly, commercial vehicle leasing schemes can have great benefits for all concerned. Flexible car hire and short-term car leasing schemes can also be a good form of company contract hire for transient workforces.

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